Great Elm Group, Inc. 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures The Company’s management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective as of June 30, 2022. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for preparation of the accompanying consolidated financial statements in accordance with US GAAP. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13(a)-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting is supported by written policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 29 Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021 as required by the Exchange Act. In making this assessment, we used the criteria set forth in the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the framework, management concluded that Great Elm Group, Inc.’s internal control over financial reporting was effective as of June 30, 2022. Changes in Internal Control Over Financial Reporting T here have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item 10 . Directors, Executive Officers and Corporate Governance. The information required by Items 401, 405, 406, and 407(c)(3), 407(d)(4) and 407(d)(5) of Regulation S-K will be contained in our definitive proxy statement (our Proxy Statement) and is hereby incorporated by reference thereto. Item 11. Executive Compensation. The information required by Items 402, 407(e)(4) and 407(e)(5) of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by Item 201(d) and Item 403 of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by Item 404 and Item 407(a) of Regulation S-K will be contained in our Proxy Statement and is hereby incorporated by reference thereto. Item 14. Principal Accountant Fees and Services. The information required by Item 9(e) of Schedule 14A will be contained in our Proxy Statement and is hereby incorporated by reference thereto. PART IV Item 15. Exhibits, Financ ial Statement Schedules. Financial Statements The information required by this Item appears beginning on page F-1 of this Annual Report on Form 10-K and is incorporated in this Item 15 by reference. Financial Statement Schedules Schedules are omitted because they are not required or are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 30 Exhibits The exhibit index attached hereto is incorporated by reference. We will furnish any exhibit upon request made to our Corporate Secretary, 800 South Street, Suite 230, Waltham, MA 02453. We charge $0.50 per page to cover expenses of copying and mailing. EXH IBIT INDEX We will furnish any exhibit upon request made to our Corporate Secretary, 800 South Street, Suite 230, Waltham, MA 02453. We charge $0.50 per page to cover expenses of copying and mailing. Unless otherwise indicated, all references are to filings by Great Elm Group, Inc. (the Registrant ) with the Securities and Exchange Commission under File No. 001-39832 Exhibit No. Description 2.1 Agreement and Plan of Merger, dated December 21, 2020, by and among Great Elm Capital Group, Inc., the Registrant and Forest Merger Sub, Inc. (incorporated by reference to the Exhibit 2.1 to the Form 8-K filed on December 29, 2020) 2.2* Purchase Agreement by and among Great Elm FM Acquisition, Inc. and Monomoy Properties Fort Myers FL, LLC, dated June 23, 2021 (incorporated by reference to the Exhibit 2.1 to the Form 8-K filed on June 24, 2021) 3.1 Certificate of Incorporation of the Registrant, dated October 23, 2020 (incorporated by reference to the Exhibit 3.1 to the Form 8-K filed on December 29, 2020) 3.2 Bylaws of the Registrant, dated October 23, 2020 (incorporated by reference to the Exhibit 3.2 to the Form 8-K filed on December 29, 2020) 4.1 Form of the Registrant’s Common Stock Certificate (incorporated by reference to the Exhibit 4.1 to the Form 8-K filed on December 29, 2020) 4.2 Certificate of Designation of Series A Junior Participating Cumulative Preferred Stock of the Registrant, dated December 23, 2020 (incorporated by reference to the Exhibit 4.2 to the Form 8-K filed on December 29, 2020) 4.3 Stockholders’ Rights Agreement, dated December 29, 2020, by and between the Registrant and Computershare Trust Company, N.A. (incorporated by reference to the Exhibit 4.3 to the Form 8-K filed on December 29, 2020) 4.4 Form of 5.0% Convertible Senior PIK Notes due 2030 (incorporated by reference to the Exhibit 4.4 to the Form 8-K filed on December 29, 2020) 4.5 Form of Amendment to 5.0% Convertible Senior PIK Notes due 2030 (incorporated by reference to the Exhibit 4.1 to the Form 10-Q filed on May 14, 2021) 4.6 Registration Rights Agreement, dated as of February 26, 2020, by and between Great Elm Capital Group, Inc. and certain accredited investors party thereto (incorporated by reference to the Exhibit 4.5 to the Form 8-K filed on December 29, 2020) 4.7 Description of Securities 4.8 Base Indenture, dated as of June 9, 2022, by and between Great Elm Group, Inc. and American Stock and Transfer & Trust Company, LLC, as Trustee (incorporated by reference to the Exhibit 4.1 to the Form 8-K filed on June 9, 2022) 4.9 First Supplemental Indenture, dated as of June 9, 2022, by and between Great Elm Group, Inc. and American Stock and Transfer & Trust Company, LLC, as Trustee (incorporated by reference to the Exhibit 4.2 to the Form 8-K filed on June 9, 2022) 4.10 Form of 7.25% Note Due 2027 (incorporated by reference to the Exhibit 4.3 to the Form 8-K filed on June 9, 2022) 10.1+ Offer Letter, dated December 29, 2020 between Peter A. Reed and the Registrant (incorporated by reference to the Exhibit 10.1 to the Form 8-K filed on December 29, 2020) 10.2+ Offer Letter, dated December 29, 2020 between Adam Kleinman and the Registrant (incorporated by reference to the Exhibit 10.2 to the Form 8-K filed on December 29, 2020) 10.3+ Offer Letter, dated December 29, 2020 between Brent Pearson and the Registrant (incorporated by reference to the Exhibit 10.3 to the Form 8-K filed on December 29, 2020) 10.4+ Compensation Plan Agreement, dated December 29, 2020, by and between Great Elm Capital Group, Inc. and the Registrant (incorporated by reference to the Exhibit 10.4 to the Form 8-K filed on December 29, 2020) 31 10.5+ Form of Director and Officer Indemnification Agreement (incorporated by reference to the Exhibit 10.5 to the Form 8-K filed on December 29, 2020) 10.6+ Form of Performance Stock Award (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on November 9, 2016 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.7+ Form of US Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed on May 12, 2004 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.8+ Second Amended and Restated 2006 Stock Incentive Plan, amended and restated effective November 12, 2013 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on February 7, 2014 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.9+ Form of 2006 Stock Incentive Plan Restricted Stock Unit Grant Notice (incorporated by reference to Exhibit 10.9 to the Form 10-Q filed on February 8, 2012 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.10+ Second Amended and Restated 1999 Directors’ Equity Compensation Plan, amended and restated effective September 13, 2013 and November 12, 2013 (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on February 7, 2014 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.11+ Form of Notice of Stock Option Grant and Form of Stock Option Agreement under the Registrant’s Amended and Restated 1999 Directors’ Equity Compensation Plan (incorporated by reference to Exhibit 99.2 to the Form S-8 filed on December 4, 2009 by Great Elm Capital Group, Inc. (Registration Statement No. 333-163480)) 10.12+ Form of Notice of Restricted Stock Bonus Grant and Form of Restricted Stock Bonus Agreement under the Registrant’s Amended and Restated 1999 Directors’ Equity Compensation Plan (incorporated by reference to Exhibit 99.3 to the Form S-8 filed on December 4, 2009 by Great Elm Capital Group, Inc. (Registration Statement No. 333-163480)) 10.13+ Great Elm Group, Inc. Amended and Restated 2016 Long-Term Incentive Compensation Plan (As Amended, Effective November 17, 2021) (incorporated by reference to Exhibit 10.1 to the Form 8-K of Great Elm Group, Inc. filed on November 17, 2021) 10.14+ 2016 Employee Stock Purchase Plan (incorporated by reference to Annex E to the Proxy Statement filed on May 25, 2016 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.15+ Form of Amended and Restated Notice of Performance Stock Award (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on September 20, 2017 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.16+ Form of Restricted Stock Unit Award (Directors) under the Registrant’s Amended and Restated 2016 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.16 to the Form 10-K of Great Elm Group, Inc. filed on September 21, 2021) 10.17+ Form of Restricted Stock Unit Award (Employees) under the Registrant’s Amended and Restated 2016 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.17 to the Form 10-K of Great Elm Group, Inc. filed on September 21, 2021) 10.18+ Amended and Restated Great Elm Capital Management Performance Bonus Plan, dated February 6, 2019, (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 8, 2019 by Great Elm Capital Group, Inc. (File No. 001-16073)) 10.19 Transaction Agreement, dated March 10, 2021, by and among the Registrant, MAST Capital Management, LLC and David Steinberg (incorporated by reference to the Exhibit 10.1 to the Form 10-Q filed on May 14, 2021) 10.20 Investment Management Agreement, dated as of September 27, 2016, by and between Great Elm Capital Corp. and Great Elm Capital Management, Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 7, 2016 by Great Elm Capital Corp. (File No. 814-01211)) 10.21 Administration Agreement, dated as of September 27, 2016, by and between Great Elm Capital Corp. and Great Elm Capital Management, Inc. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 7, 2016 by Great Elm Capital Corp. (File No. 814-01211)) 10.22 Profit Sharing Agreement, dated as of November 3, 2016, by and between Great Elm Capital Management, Inc. and Great Elm Capital GP, LLC (formerly GECC GP Corp.) (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on November 9, 2016) 32 10.23 Promissory Note, by and between Great Elm Capital Management, Inc. and Imperial Capital Asset Management, LLC, dated May 4, 2022 (incorporated by reference to Exhibit 10.1 to the Form 8-K of Great Elm Group, Inc. filed on May 5, 2022) 14.1 Code of Conduct of Great Elm Group, Inc. (incorporated by reference to the Exhibit 14.1 to the Form 8-K filed on December 29, 2020) 21.1 Subsidiaries of the Registrant. 23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm 23.2 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm 31.1 Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Audited financial statements of Great Elm Capital Corp. (incorporated by reference to the annual report on Form 10-K/A filed on April 19, 2022 by Great Elm Capital Corp. (File No. 814-01211)) 101 Materials from the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, formatted in inline Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related Notes to the Condensed Consolidated Financial Statements, tagged in detail (furnished herewith). 104 The cover page from the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021, formatted in inline XBRL (included as Exhibit 101). * Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. GEG hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission. + Indicates a management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary. We have elected not to provide a Form 10-K summary. 33 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of September 12, 2022. GREAT ELM GROUP, INC. By: /s/ Peter A. Reed Name: Peter A. Reed Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of September 12, 2022. Signature Title /s/ Peter A. Reed Chief Executive Officer Peter A. Reed (Principal Executive Officer) /s/ Brent J. Pearson Chief Financial Officer & Chief Accounting Officer Brent J. Pearson (Principal Financial and Accounting Officer) /s/ Matthew A. Drapkin Director Matthew A. Drapkin /s/ Thomas S. Harbin III Director Thomas S. Harbin III /s/ James H. Hugar Director James H. Hugar /s/ David Matter Director David Matter /s/ James P. Parmelee Director James P. Parmelee /s/ Jason W. Reese Director Jason W. Reese /s/ Eric J. Scheyer Director Eric J. Scheyer /s/ Jeffrey S. Serota Director Jeffrey S. Serota 34 INDEX TO FINANC IAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) F- 2 Consolidated Balance Sheets at June 30, 2022 and 2021 F- 4 Consolidated Statements of Operations for the years ended June 30, 2022 and 2021 F- 5 Consolidated Statements of Stockholders’ Equity and Contingently Redeemable Non-Controlling Interest for the years ended June 30, 2022 and 2021 F- 6 Consolidated Statements of Cash Flows for the years ended June 30, 2022 and 2021 F- 7 Notes to the Consolidated Financial Statements F- 9 F- 1 Report of Independent Regist ered PUBLIC Accounting Firm Board of Directors and Shareholders Great Elm Group, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Great Elm Group, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and contingently redeemable non-controlling interest, and cash flows for each of the two years in the period ended June 30, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Durable Medical Equipment Revenue Recognition – Variable Consideration As described further in notes 2 and 3 to the financial statements, and disclosed in the consolidated statement of operations, the Company recorded $68.0 million of total revenues for the year ended June 30, 2022, of which $63.5 million related to the Durable Medical Equipment operating segment. The Company’s revenue is recorded based on the amount that the Company expects to receive in exchange for the goods or services provided, which consists of the transaction price net of estimates for variable consideration. Actual amounts of consideration ultimately received may differ from the Company’s initial estimates. We identified the estimation of the variable consideration within the Durable Medical Equipment revenue streams as a critical audit matter. F- 2 The principal considerations for our determination that variable consideration is a critical audit matter are (i) the significant judgment exercised by the Company in estimating variable consideration and (ii) the volume and variability of information necessary to evaluate the initial amounts recorded that are subject to the Company’s estimate of variable consideration. Our audit procedures related to the variable consideration constraint included the following, among others: • For a sample of revenue transactions, we (i) performed detailed transaction testing by agreeing the amount recognized to source documentation, which included fee schedules, explanation of benefits, or cash payments, as available and (ii) evaluated the rate of adjustment from our sample relative to the Company’s incremental constraints for variable consideration • Tested management’s process for determining the reasonableness of constraints for variable consideration, including testing of the inputs to the calculation and reperformance of management’s analysis to evaluate the reasonableness of rates applied to those inputs /s/ Grant Thornton LLP We have served as the Company’s auditor since 2019. Boston, Massachusetts September 12, 2022 F- 3 GREAT ELM GROUP, INC. CONSOLIDATED B ALANCE SHEETS Dollar amounts in thousands, except per share amounts ASSETS 2022 2021 Current assets: Cash and cash equivalents $ 23,595 $ 24,382 Accounts receivable 5,867 6,518 Related party receivables 2,445 1,665 Investments, at fair value (cost $ 68,766 and $ 45,326 , respectively) 48,042 24,044 Inventories 898 1,066 Prepaid and other current assets 1,050 3,791 Assets of consolidated funds: Investments, at fair value (cost $ 2,432 and $ 26,814 , respectively) 1,797 26,490 Prepaid expenses 746 578 Total current assets 84,440 88,534 Property and equipment, net 538 981 Equipment held for rental, net 7,504 7,391 Identifiable intangible assets, net 19,171 8,928 Goodwill 52,463 50,536 Right of use assets 3,722 5,241 Other assets 249 258 Total assets $ 168,087 $ 161,869 LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,038 $ 5,521 Accrued expenses and other liabilities 7,389 6,955 Deferred revenue 1,218 4,438 Current portion of related party payables 486 - Current portion of lease liabilities 1,559 1,920 Current portion of equipment financing debt 2,993 1,974 Liabilities of consolidated funds - accrued expenses and other 11 12,197 Total current liabilities 19,694 33,005 Lease liabilities, net of current portion 2,375 3,596 Long term debt (face value $ 26,945 and $ 0 , respectively) 25,532 - Related party payables 1,120 - Related party notes payable, net of current portion 6,270 - Convertible Notes (face value $ 36,085 and $ 34,346 , respectively, including $ 15,133 and $ 16,231 , respectively, held by related parties) 35,187 33,333 Equipment financing debt, net of current portion - 67 Redeemable preferred stock of subsidiaries (held by related parties, face value $ 35,824 and $ 37,018 , respectively) 34,747 35,529 Other liabilities 908 915 Total liabilities 125,833 106,445 Commitments and Contingencies (Note 20) Contingently redeemable non-controlling interest 2,225 2,639 Stockholders' equity Preferred stock, $ 0.001 par value; 5,000,000 authorized and zero outstanding - - Common stock, $ 0.001 par value; 350,000,000 shares authorized and 28,932,444 shares issued and 28,507,490 outstanding at June 30, 2022; and 26,613,913 shares issued and 25,948,100 outstanding at June 30, 2021 29 26 Additional paid-in-capital 3,312,763 3,307,613 Accumulated deficit ( 3,279,296 ) ( 3,264,403 ) Total Great Elm Group, Inc. stockholders' equity 33,496 43,236 Non-controlling interests 6,533 9,549 Total stockholders' equity 40,029 52,785 Total liabilities, non-controlling interest and stockholders' equity $ 168,087 $ 161,869 The accompanying notes are an integral part of these consolidated financial statements. F- 4 GREAT ELM GROUP, INC. CONSOLIDATED STATEM ENTS OF OPERATIONS Dollar amounts in thousands, except per share data For the years ended June 30, 2022 2021 Revenues: Durable medical equipment sales and services revenue $ 41,720 $ 37,460 Durable medical equipment rental income 21,738 20,183 Investment management revenues 4,516 3,210 Total revenues 67,974 60,853 Operating costs and expenses: Cost of durable medical equipment sold and services 16,795 16,881 Cost of durable medical equipment rentals (1) 7,149 6,950 Durable medical equipment other operating expenses (2) 33,143 28,917 Investment management expenses 6,616 3,492 Depreciation and amortization 2,261 2,383 Selling, general and administrative (3) 5,982 5,892 Expenses of consolidated funds 135 75 Total operating costs and expenses 72,081 64,590 Operating loss ( 4,107 ) ( 3,737 ) Dividends and interest income 3,161 2,963 Net realized and unrealized gain (loss) on investments ( 7,571 ) 155 Net realized and unrealized gain (loss) on investments of consolidated funds ( 525 ) 545 Interest expense ( 5,786 ) ( 4,949 ) Extinguishment of debt ( 190 ) ( 1,866 ) Other income, net 2 45 Loss from continuing operations, before income taxes ( 15,016 ) ( 6,844 ) Income tax expense ( 21 ) ( 1,675 ) Loss from continuing operations ( 15,037 ) ( 8,519 ) Discontinued operations: Income from discontinued operations, net of tax - 649 Net loss $ ( 15,037 ) $ ( 7,870 ) Less: net loss attributable to non-controlling interest, continuing operations ( 144 ) ( 648 ) Less: net income attributable to non-controlling interest, discontinued operations - 53 Net loss attributable to Great Elm Group, Inc. $ ( 14,893 ) $ ( 7,275 ) Basic income (loss) per share Continuing operations $ ( 0.56 ) $ ( 0.31 ) Discontinued operations - 0.03 Net loss per share $ ( 0.56 ) $ ( 0.28 ) Diluted income (loss) per share from: Continuing operations $ ( 0.56 ) $ ( 0.31 ) Discontinued operations - 0.03 Net loss per share $ ( 0.56 ) $ ( 0.28 ) Weighted average shares outstanding Basic 26,784 25,722 Diluted 26,784 25,722 (1) Includes depreciation expense of: 6,527 6,286 (2) Net of CARES Act Stimulus of: 2,321 4,601 (3) Net of CARES Act Stimulus of: 84 168 The accompanying notes are an integral part of these consolidated financial statements. F- 5 GREAT ELM GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND CONTINGENTLY REDEEMABLE NON-CONTROLLING INTEREST Dollar and share amounts in thousands Common Stock Additional Paid-in Accumulated Total Great Elm Group, Inc. Stockholders' Non- controlling Total Stockholders' Contingently Redeemable Non-controlling Shares Amount Capital Deficit Equity Interest Equity Interest BALANCE, June 30, 2020 25,530 $ 26 $ 3,305,963 $ ( 3,257,128 ) $ 48,861 $ 3,886 52,747 $ 3,890 Net loss - - - ( 7,275 ) ( 7,275 ) ( 332 ) ( 7,607 ) ( 263 ) Issuance of common stock related to vesting of restricted stock 418 0 - - 0 - - - Distributions to non-controlling interest holders of DME Inc. - - - - - ( 988 ) ( 988 ) ( 988 ) Repurchase of interests in subsidiary - - ( 707 ) - ( 707 ) 788 81 - Issuance of Forest common stock - - - - - 2,700 2,700 - Deemed capital contribution related to issuance of convertible notes - - 602 - 602 - 602 - Issuance of interests in Consolidated Fund - - - - - 4,325 4,325 - Sale of real estate business - - - - - ( 830 ) ( 830 ) - Stock-based compensation - - 1,755 - 1,755 - 1,755 - BALANCE, June 30, 2021 25,948 26 3,307,613 ( 3,264,403 ) 43,236 9,549 52,785 2,639 Net loss - - - ( 14,893 ) ( 14,893 ) 270 ( 14,623 ) ( 414 ) Issuance of common stock related to vesting of restricted stock 1,189 1 - - 1 - 1 - Repurchase of interests in subsidiary - - ( 129 ) - ( 129 ) 86 ( 43 ) - Issuance of common stock related to asset purchase 1,370 2 2,477 - 2,479 - 2,479 - Issuance of interests in Consolidated Fund - - - - - 527 527 - Distribution of interests in Consolidated Fund - - - - - ( 3,899 ) ( 3,899 ) - Stock-based compensation - - 2,802 - 2,802 - 2,802 - BALANCE, June 30, 2022 28,507 $ 29 $ 3,312,763 $ ( 3,279,296 ) $ 33,496 $ 6,533 40,029 $ 2,225 The accompanying notes are an integral part of these consolidated financial statements. F- 6 GREAT ELM GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Dollar amounts in thousands For the years ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 15,037 ) $ ( 7,870 ) Net income from discontinued operations - ( 649 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 8,788 8,669 Stock-based compensation 2,802 1,755 Sales of investments by consolidated funds 41,692 5,842 Purchases of investments by consolidated funds ( 18,518 ) ( 31,365 ) Stock dividends received ( 350 ) ( 1,868 ) Unrealized gain on investments ( 623 ) ( 292 ) Realized loss on investments 8,194 137 Unrealized loss (gain) on investments of consolidated funds 311 ( 254 ) Realized loss (gain) on investments of consolidated funds 214 ( 291 ) Non-cash interest and amortization of capitalized issuance costs 2,117 1,851 Loss on extinguishment of debt 190 1,866 Deferred tax (benefit) expense ( 85 ) 546 Other non-cash expense, net 2,132 1,553 Gain on sale of equipment held for rental ( 331 ) ( 452 ) Change in fair value of contingent consideration ( 121 ) ( 126 ) Changes in operating assets and liabilities: Related party receivable ( 876 ) ( 606 ) Accounts receivable 651 2,099 Inventories 298 617 Prepaid assets, deposits, and other assets 3,158 ( 3,223 ) Operating leases ( 2,195 ) ( 1,563 ) Deferred revenues ( 3,220 ) ( 1,214 ) Related party payable 486 - Accounts payable, accrued liabilities and other liabilities ( 397 ) 3,931 Net cash provided by (used in) operating activities - continuing operations 29,280 ( 20,907 ) Net cash provided by operating activities - discontinued operations - 1,931 Net cash provided by (used in) operating activities 29,280 ( 18,976 ) Cash flows from investing activities: Acquisition of businesses, net of cash acquired ( 1,350 ) ( 748 ) Acquisition of assets ( 824 ) - Purchases of investments ( 20,468 ) ( 4,675 ) Sales of investments 5,499 35 Participation in related party rights offering ( 17,500 ) ( 8,751 ) Purchases of equipment held for rental ( 6,404 ) ( 6,686 ) Proceeds from sale of equipment held for rental 1,147 1,273 Purchases of property and equipment ( 147 ) ( 287 ) Net cash used in investing activities - continuing operations ( 40,047 ) ( 19,839 ) Net cash provided by investing activities - discontinued operations - 4,357 Net cash used in investing activities ( 40,047 ) ( 15,482 ) F- 7 GREAT ELM GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Dollar amounts in thousands For the years ended June 30, 2022 2021 Cash flows from financing activities: Proceeds of issuance of baby bond 26,945 - Principal payments on revolving line of credit - ( 3,900 ) Principal payments on note payable to seller - ( 25,105 ) Principal payments on equipment financing ( 5,421 ) ( 4,378 ) Proceeds from equipment financing 6,373 3,642 Redemption of redeemable preferred stock of subsidiary ( 1,194 ) - Capitalized issuance costs ( 1,429 ) ( 1,250 ) Due to broker of consolidated funds ( 11,379 ) 11,249 Repurchase of interests in subsidiary ( 43 ) ( 132 ) Payments of debt extinguishment costs - ( 1,627 ) Dividends paid to non-controlling interest holders of DME Inc. - ( 368 ) Issuance of Forest preferred stock - 35,010 Capital contributions from non-controlling interests in consolidated funds 27 4,825 Distributions to non-controlling interests in consolidated funds ( 3,899 ) - Proceeds from issuance of Forest common stock, gross - 2,700 Net cash provided by financing activities - continuing operations 9,980 20,666 Net cash used in financing activities - discontinued operations - ( 2,326 ) Net cash provided by financing activities 9,980 18,340 Net decrease in cash and cash equivalents ( 787 ) ( 16,118 ) Cash and cash equivalents at beginning of year 24,382 40,500 Cash and cash equivalents at end of year $ 23,595 $ 24,382 Cash paid for interest $ 3,666 $ 2,815 Non-cash investing and financing activities Non-cash consideration transferred and debt issued in asset acquisition $ 10,000 $ - Lease liabilities and right of use assets arising from operating leases 543 1,121 Contingent consideration 1,617 397 Distribution of HC LLC (as defined below) preferred stock to non-controlling interest holders of DME Inc. - 1,608 Repurchase of GP Corp. Note - 3,072 Issuance of convertible notes - 2,250 The accompanying notes are an integral part of these consolidated financial statements. F- 8 GREAT ELM GROUP, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Great Elm Group, Inc. (referred to as the Company ) is a holding company incorporated in Delaware. The Company currently has two business operating segments: durable medical equipment and investment management, with general corporate representing unallocated costs and activity to arrive at consolidated operations. The Company is pursuing business development opportunities in durable medical equipment, investment management and other industries. Investment Management On September 27, 2016, the Company’s wholly-owned SEC-registered investment advisor subsidiary Great Elm Capital Management, Inc. ( GECM ), a Delaware corporation, entered into an investment management agreement (the IMA ) with Great Elm Capital Corp., a publicly-traded business development company incorporated in Maryland ( GECC ). On May 4, 2022, GECM acquired the investment management agreement of Monomoy Properties REIT, LLC ( Monomoy REIT ) from Imperial Capital Asset Management, LLC ( ICAM ). Formed in 2014, Monomoy REIT is a private real estate investment trust founded by ICAM, with a 108-property portfolio of diversified net leased industrial assets. The Company earns revenue through the investment management agreements of these and other private investment vehicles which provide for management fees, property management fees, incentive fees and administrative fees. Durable Medical Equipment On September 7, 2018, the Company, through its majority-owned subsidiary, Great Elm DME Holdings, Inc. ( DME Holdings ), acquired an 80.1 % equity interest in Great Elm DME, Inc. ( DME Inc. ) an entity formed to acquire and combine two companies, Valley Healthcare Holding, LLC and Northwest Medical, LLC. ( Northwest ), which both specialize in the distribution of respiratory care equipment, including primarily positive air pressure equipment and supplies, ventilators and oxygen equipment and operate in Arizona, Nebraska Oregon, Washington and Alaska. The Company has subsequently expanded its durable medical equipment business through acquisitions in 2019 and 2021. On May 31, 2021, our wholly-owned subsidiary DME Holdings exchanged their 80.1 % interests in DME Inc. for an identical 80.1 % direct interest in DME Inc.’s subsidiary Great Elm Healthcare, LLC ( HC LLC ), which is the sole owner of the durable medical equipment operating subsidiaries. Following the consummation of the taxable reorganization, the Company no longer has an interest in DME Inc. General Corporate On December 29, 2020, the Company completed a non-taxable reorganization of the Company's corporate structure, where Great Elm Capital Group, Inc. ( GEC ) changed its name to Forest Investments, Inc. ( Forest ) and became a wholly owned subsidiary of a new holding company, Great Elm Group, Inc ( GEG ). Outstanding shares of Forest under the ticker symbol “GEC” were automatically converted into shares of common stock of Great Elm Group, Inc., ticker symbol “GEG”. Forest common stock was then delisted from the Nasdaq Global Select Market and subsequently deregistered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act ). The Holding Company Reorganization (as defined in Note 4 – Holding Company Reorganization and Financing Transaction) was a tax-free transaction for U.S. federal income tax purposes for the Company’s shareholders. F- 9 Discontinued Operations We launched our real estate business in March 2018 with an investment of $ 2.7 million in a majority-interest in two Class A office buildings totaling 257,000 square feet situated on 17 acres of land in Fort Myers, Florida (collectively, the Property). The Property was fully-leased, on a triple-net basis, to a single tenant through March 31, 2030. On June 23, 2021, the Company sold its real estate business for $ 4.6 million in cash. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Wholly-owned subsidiaries include GECM, Great Elm Opportunities GP, Inc. ( GEO GP ), Great Elm Capital GP, LLC ( GEC GP ), Great Elm FM Acquisition, Inc. ( FM Acquisition ), DME Holdings and Great Elm DME Manager, LLC ( DME Manager ). Majority-owned subsidiaries include Forest, HC LLC and its seven wholly-owned subsidiaries. In addition, we have determined that the Company is the primary beneficiary of certain variable interest entities, and therefore the operations of those entities have been included in our consolidated results for the relevant periods. 2. Summary of Significant Accounting Policies Basis of Presentation and Use of Estimates The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America ( US GAAP ) requires the Company to make estimates and assumptions that affect the reported amounts in the financial statements and disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates all of these estimates and assumptions. The most important of these estimates and assumptions relate to revenue recognition, the valuation of excess and obsolete inventories, depreciable lives of equipment, impairment of long lived tangible and intangible assets, valuation allowance for deferred tax assets, fair value measurements including stock-based compensation and contingent consideration, estimates associated with the application of acquisition accounting, and the value of lease liabilities and corresponding right to use assets. Although these and other estimates and assumptions are based on the best available information, actual results could be different from these estimates. In addition, the historical results of the real estate business operating segment have been reflected in the accompanying consolidated statements of operations for the year ended June 30, 2021 as discontinued operations. See Note 5 – Discontinued Operations. Principles of Consolidation The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, majority-owned subsidiaries, and subsidiaries in which we hold a controlling financial interest as of the financial statement date. In most cases, a controlling financial interest often reflects ownership of a majority of the voting interests. We consolidate a variable interest entity ( VIE ) when we possess both the power to direct the activities of the VIE that most significantly impacts its economic performance and we are either obligated to absorb the losses that could potentially be significant to the VIE or we hold the right to receive benefits from the VIE that could potentially be significant to the VIE. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent company’s equity or outside of permanent equity for non-controlling interests that are contingently redeemable. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary. Results of operations attributable to the non-controlling interests are included in the Company’s consolidated statements of operations. Segments The Company has two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations. The Company regularly reviews each segment for purposes of allocating resources and assessing performance. F- 10 Cash and Cash Equivalents Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash equivalents consist primarily of exchange-traded money market funds. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured. Accounts Receivable Substantially all of the accounts receivable balance relates to the durable medical equipment business. Accounts receivable are customer obligations due under normal sales and rental terms and represent the amount estimated to be collected from the patient customers and, if applicable, the third-party private insurance provider or government program (collectively, Payors ), based on the contractual agreements. The Company does not require collateral in connection with its customer transactions and aside from verifying insurance coverage, does not perform credit checks on patient customers. Revenue and accounts receivable have been constrained to the extent that billed amounts exceed the amounts estimated to be collected. The constrained transaction price relates primarily to expected billing adjustments with the Payors and patient customers. Management’s evaluation of variable consideration takes into account such factors as past experience, information about specific receivables, Payors and patient customers. The revenue reserves related to constraints on variable consideration were $ 1.9 million and $ 2.5 million as of June 30, 2022 and 2021 , respectively. The Company recognized a reduction to revenue of $ 3.5 million and $ 5.9 million related to such constraints during the years ended June 30, 2022 and 2021. See Note 3 – Revenue. The assessment of variable consideration to be constrained is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in earnings in the periods in which they become known. There were no material adjustments to revenues made in the year ended June 30, 2022 relating to prior periods. Changes in variable consideration are recorded as a component of net revenues. The Company generally does not allow returns from providers for reasons not covered under the manufacturer’s standard warranty. Therefore, there is no provision for sales return reserves. The Company does not have significant bad debt experience with Payors, and therefore the allowance for doubtful accounts is immaterial. As of June 30, 2022 the Company had unbilled receivables of approximately $ 0.4 million that relate to transactions where the Company has the ultimate right to invoice a Payor under the terms of the arrangement, but are not currently billed and are therefore contract assets. Such contract assets are included in accounts receivable in the consolidated balance sheets. Investments Investments include investments in GECC, Monomoy Properties UpREIT, the operating partnership of Monomoy REIT ( Monomoy UpREIT ), and other private funds, which are carried at fair value. Fair Value Measurements Certain assets and liabilities are carried at fair value under US GAAP. See Note 8 – Fair Value Measurements. Property, Equipment and Rental Equipment The Company records property and equipment acquired at cost. The costs of property acquired from asset acquisitions or business combinations is recorded at fair value at the date of acquisition based on its estimated replacement costs. F- 11 Within the durable medical equipment businesses, the Company capitalizes the cost of equipment predominantly leased out to patient customers within equipment held for rental, net. These purchases are classified as cash outflows from investing activities when they are paid. The Company capitalizes the cost of equipment predominantly sold to patient customers within inventories. These purchases are classified as cash outflows from operating activities when they are paid. A portion of equipment recorded within equipment held for rental, net, could ultimately be sold. A portion of equipment recorded within inventories could ultimately be leased. Management is not able to accurately project the ultimate use of equipment, which in many cases is determined by Payor reimbursement terms, and has therefore adopted the above stated policy. Management has estimated the useful lives of equipment leased to customers where title ultimately transfers to customers (e.g., capped rentals, typically 13 months with title transfer) based upon an analysis of ultimate disposition of rental equipment, some of which is returned to the Company and either re-leased or sold. The Company recognizes depreciation in amounts sufficient to match the cost of depreciable assets to operations over their estimated service lives, which considers the term of lease for any leased assets. The Company capitalizes expenditures for improvements that significantly extend the useful life of an asset. The Company charges expenditures for maintenance and repairs to operations in the periods incurred. When assets are sold, the asset and accumulated depreciation are eliminated, and a gain or loss is recognized in operating income. Depreciation is recognized using the straight-line method over their estimated useful lives as follows: Description Life in Years Property and Equipment Leasehold improvements lesser of 7 years or life of the lease Vehicles 5 Sleep study equipment 5 Furniture and fixtures 1 to 5 Computer equipment and software 3 Rental Equipment Medical equipment for lease 1 to 5 Inventories Inventories, which principally consist of durable medical equipment and related supplies that are predominantly sold, are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company reduces the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments or other economic factors. The Company bases its provisions for excess, expired and obsolete inventory primarily on purchasing activity and usage. A significant change in the timing or level of demand for our products as compared with forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. As the Company purchases all of its inventories, all inventories are categorized as finished goods. There were no significant write-offs during the year ended June 30, 2022 . Goodwill and Other Identifiable Intangible Assets Goodwill represents the excess of fair value over identifiable tangible and intangible net assets acquired in business combinations. Goodwill is not amortized for US GAAP purposes. Instead goodwill is reviewed for impairment at least annually, or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test on the first day of the fiscal fourth quarter, or as required when impairment triggering events are identified. The Company amortizes its identifiable intangible assets over their estimated useful lives using a discounted cash flow attribution or straight-line methods as determined appropriate for each identifiable intangible asset. The Company amortizes its identifiable intangible assets over periods ranging from five to fifteen years . F- 12 Long-lived Assets Long-lived assets include property and equipment, intangible assets and the right to use asset. These assets are evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable based on undiscounted cash flows. If an impairment is indicated, the Company records the impaired asset at fair value and records a charge to operations. Leases and Right of Use Assets We determine if an arrangement is a lease at inception. As of June 30, 2022, all of our leases are operating leases. Operating leases are included in right of use ( ROU ) assets, current portion of lease liabilities and lease liabilities net of current portion in the consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide a readily determinable implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU assets also include any lease payments made and adjustments recorded in acquisition accounting. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, primarily consisting of common area maintenance charges, and have elected the practical expedient to account for lease and non-lease components together as a single lease component. Cost of Durable Medical Equipment Sold and Services Cost of durable medical equipment sold and services is comprised of costs included in inventory for medical equipment sold and direct costs associated with providing sleep study services, including staff to perform the studies and supplies used in the studies. Cost of Durable Medical Equipment Rentals Cost of rentals includes depreciation on medical equipment held for lease and related maintenance expenses. Durable Medical Equipment Other Operating Expenses The Company classifies direct expenses of its durable medical equipment segment, including payroll, facilities and equipment costs, professional fees and other administrative costs, in durable medical equipment other operating expenses in the accompanying consolidated statements of operations. Investment Management Expenses The Company classifies all direct expenses of its investment management segment including: payroll, stock-compensation, and related taxes and benefits; facilities costs; and consulting; in investment management expenses in the accompanying consolidated statements of operations. Depreciation and Amortization The Company has separately presented depreciation and amortization expense, except for depreciation expense which is included in cost of durable medical equipment rentals as described above. Such depreciation and amortization expense is based on the estimated useful lives of the underlying assets. F- 13 Stock-based Compensation Stock-based compensation costs for eligible employees and directors are measured at fair value on the date of grant and are expensed over the requisite service period using a straight-line attribution method for the entire award that are subject to only service vesting conditions. Awards with both performance and service requirements are expensed using a graded vesting attribution method over the requisite service periods. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary, in order to reduce deferred tax assets to the amounts more likely than not to be recovered. The Company has established a valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences because the Company is unable to conclude that future utilization of a portion of its net operating loss carryforwards and other deferred tax assets is more likely than not. The calculation of the Company’s tax positions involves dealing with uncertainties in the application of complex tax regulations for federal and several different state tax jurisdictions. The Company is periodically reviewed by tax authorities regarding the amount of taxes due. These reviews include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. The Company does not recognize income tax benefits for positions that it takes on its income tax returns that do not meet the more likely than not standard on its technical merits. Asset Acquisitions and Business Combinations Asset acquisitions are accounted for using the cost accumulation method while business combinations are accounted for at fair value. Determining whether the acquired set represents an asset acquisition or a business combination requires quantitative and qualitative assessments that require judgment. In an asset acquisition, acquisition costs are capitalized as part of the acquired set. The accounting for asset acquisitions requires estimates and judgment to allocate the costs incurred to acquire the assets among the assets acquired using their relative fair value. As such, the values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. F- 14 In a business combination, acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses; previously held equity interests are valued at fair value upon the acquisition of a controlling interest; restructuring costs associated with a business combination are expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. Measurement period adjustments are made in the period in which the amounts are determined and the current period income effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. All changes that do not qualify as measurement period adjustments are also included in current period earnings. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent consideration, are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of finite-lived intangible assets, or the recognition of additional consideration which would be expensed. The fair value of contingent consideration is remeasured each period based on relevant information and changes to the fair value are included in the operating results for the period within general and administrative expense. Net Income (Loss) Per Share The following table presents the calculation of basic and diluted earnings (loss) per share: For the years ended June 30, (in thousands except per share amounts) 2022 2021 Loss from continuing operations $ ( 15,037 ) $ ( 8,519 ) Income from discontinued operations, net of tax - 649 Net loss $ ( 15,037 ) $ ( 7,870 ) Less: net loss attributable to non-controlling interest, continuing operations ( 144 ) ( 648 ) Less: net income attributable to non-controlling interest discontinued operations - 53 Net loss attributable to Great Elm Group, Inc. $ ( 14,893 ) $ ( 7,275 ) Weighted average shares basic and diluted: Weighted average shares of common stock outstanding 26,784 25,722 Weighted average shares used in computing income (loss) per share 26,784 25,722 Basic and diluted income (loss) per share from: Loss from continuing operations $ ( 0.56 ) $ ( 0.31 ) Income from discontinued operations - 0.03 Net loss per share $ ( 0.56 ) $ ( 0.28 ) When calculating earnings per share, we are required to adjust for the dilutive effect of common stock equivalents. As of June 30, 2022 the Company had 13,839,273 potential shares of common stock, including 10,392,545 shares of common stock issuable upon the conversion of the Company’s convertible notes, that are not included in the diluted net income (loss) per share calculation because to do so would be anti-dilutive. As of June 30, 2021, the Company had 13,289,022 potential shares of common stock, including 9,891,734 shares of common stock issuable upon the conversion of the Company’s convertible notes, that are not included in the diluted net income (loss) per share calculation because to do so would be antidilutive. As of June 30, 2022 and 2021, the Company had an aggregate of 1,216,481 and 732,909 issued shares, respectively, that are subject to forfeiture by the employee at a nominal price if service and/or performance milestones are not met. The Company does not account for such shares as being outstanding for accounting purposes since they are unvested and subject to forfeiture. F- 15 Restrictions on Subsidiary Dividends The ability of HC LLC to pay dividends is subject to compliance with the restricted payment covenants under the DME Revolver. Concentration of Risk The Company’s net investment revenue and receivables from continuing operations are primarily attributable to the management of one investment vehicle, GECC. See Note 7 – Related Party Transactions. The Company’s durable medical equipment revenue and related accounts receivable are concentrated with third-party Payors. The following table summarizes customer concentrations as a percentage of revenues: For the years ended June 30, 2022 2021 Government Payor 35 % 37 % Third-party Payor 12 % 12 % The following table summarizes customer concentrations as a percentage of accounts receivable: As of June 30, 2022 2021 Government Payor 29 % 30 % Third-party Payor 14 % 14 % Recently Adopted Accounting Standards Accounting for Convertible Instruments In August 2020, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) 2020-06 , Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments by eliminating certain separation models. Under ASU 2020-06, a convertible debt instrument will generally be reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the interest rate of convertible debt instruments will be closer to the coupon interest rate. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance in this ASU is effective for fiscal years beginning after December 31, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this ASU on July 1, 2021 under the full retrospective method. When our Convertible Notes were originally issued on February 29, 2020, we recorded a $ 12.6 million discount to additional paid-in capital and against the Convertible Notes due to the existence of a cash conversion feature. Upon adoption we reversed this entry to additional-paid in capital and the Convertible Notes in all periods presented, and reversed any life-to-date interest expense and deferred tax expense associated with the amortization of the discount as an adjustment to beginning retained earnings of the prior year. As a result of the application of the retrospective adoption of ASU 2020-06, certain line items in our consolidated financial statements and related notes were adjusted as follows: As of June 30, 2021 Consolidated Balance Sheet Impact As Reported (1) ASU 2020-06 Adjustment As Adjusted (1) Liabilities Convertible notes $ 22,054 $ 11,279 $ 33,333 Other liabilities 1,070 ( 155 ) 915 Total Liabilities 95,321 11,124 106,445 Stockholders' equity Additional paid-in-capital 3,319,767 ( 12,154 ) 3,307,613 Accumulated deficit ( 3,265,433 ) 1,030 ( 3,264,403 ) Total Great Elm Group, Inc Stockholder's Equity 54,360 ( 11,124 ) 43,236 Total Stockholder's Equity 63,909 ( 11,124 ) 52,785 F- 16 For the year ended June 30, 2021 Consolidated Statement of Operations Impact As Reported (1) ASU 2020-06 Adjustment As Adjusted (1) Non-operating expenses Interest expense $ ( 5,620 ) $ 671 $ ( 4,949 ) Net loss from continuing operations Loss from continuing operations, before income taxes ( 7,515 ) 671 ( 6,844 ) Income tax expense ( 1,813 ) 138 ( 1,675 ) Loss from continuing operations ( 9,328 ) 809 ( 8,519 ) Discontinued operations: Income from discontinued operations, net of tax 649 649 Net loss ( 8,679 ) 809 ( 7,870 ) Less: net loss attributable to non-controlling interest, continuing operations ( 648 ) ( 648 ) Less: net income attributable to non-controlling interest, discontinued operations 53 53 Net loss attributable to Great Elm Group ( 8,084 ) 809 ( 7,275 ) Net loss per share (basic and diluted) ( 0.31 ) 0.03 ( 0.28 ) For the year ended June 30, 2021 Consolidated Statements of Stockholders' Equity Impact As Reported (1) ASU 2020-06 Adjustment As Adjusted (1) Net loss ( 8,084 ) 809 ( 7,275 ) Accumulated Deficit ( 3,265,433 ) 1,030 ( 3,264,403 ) Total Great Elm Group, Inc. Stockholder's Equity 54,360 ( 11,124 ) 43,236 Total Stockholder's Equity 63,909 ( 11,124 ) 52,785 For the year ended June 30, 2021 Consolidated Statement of Cash Flows Impact As Reported (1) ASU 2020-06 Adjustment As Adjusted (1) Net loss ( 8,679 ) 809 ( 7,870 ) Non-cash interest and amortization of capitalized issuance costs 2,522 ( 671 ) 1,851 Deferred tax expense 684 ( 138 ) 546 Net cash provided by (used in) operating activities - continuing operations ( 20,907 ) - ( 20,907 ) Net cash provided by operating activities - discontinued operations 1,931 - 1,931 Net cash provided by (used in) operating activities ( 18,976 ) - ( 18,976 ) Net cash used in investing activities - continuing operations ( 19,839 ) - ( 19,839 ) Net cash provided by investing activities - discontinued operations 4,357 - 4,357 Net cash used in investing activities ( 15,482 ) - ( 15,482 ) Net cash provided by financing activities - continuing operations 20,666 - 20,666 Net cash used in financing activities - discontinued operations ( 2,326 ) - ( 2,326 ) Net cash provided by financing activities 18,340 - 18,340 Net increase (decrease) in cash and cash equivalents ( 16,118 ) - ( 16,118 ) Cash and cash equivalents at beginning of year 40,500 - 40,500 Cash and cash equivalents at end of year 24,382 - 24,382 F- 17 (1) The As Reported column refects amounts originally reported in our Form 10-K filed on September 21, 2021. The As Adjusted column reflects recast amounts reported in our Form 8-K filed on May 5, 2022. Recently Issued Accounting Standards Current Expected Credit Losses In June 2016, the FASB issued ASU 2016-13 , Financial Instruments – Credit Losses (Topic 326) , which changes the impairment model for financial instruments, including trade receivables from an incurred loss method to a new forward looking approach, based on expected losses. The estimate of expected credit losses will require entities to incorporate considerations of historical experience, current information and reasonable and supportable forecasts. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements. Reference Rate Reform In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848): facilitation of the Effects of Reference Rate Reform on Financial Reporting, in response to the United Kingdom Financial Conduct Authority which announced the desire to phase out the use of London Interbank Offered Rate ( LIBOR ) by the end of 2021. The provisions provide optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform on financial reporting due to the cessation of LIBOR if certain criteria are met. If LIBOR ceases to exist, we may need to renegotiate outstanding notes payable outstanding which extend beyond 2021 with the respective counterparties. Adoption of the provisions in ASU 2020-04 are optional and effective from March 12, 2020 through December 31, 2022. The Company is considering the optionality of ASU 2020-04 and is evaluating the potential impact that the adoption of this ASU will have on its consolidated financial statements. 3. Revenue The revenues from each major source of revenue are summarized in the following table: For the years ended June 30, (in thousands) 2022 2021 Product and Services Revenue Investment Management Management Fees $ 3,612 $ 2,652 Property Management Fees 171 - Administration Fees 733 558 4,516 3,210 Durable Medical Equipment Equipment Sales 36,161 32,293 Service Revenues 5,559 5,167 41,720 37,460 Total product and services revenue $ 46,236 $ 40,670 Rental Revenues Durable Medical Equipment Medical Equipment Rental Income 21,738 20,183 Total rental revenue 21,738 20,183 Total $ 67,974 $ 60,853 F- 18 Revenue Accounting Under Topic 606 In determining the appropriate amount of revenue to be recognized under FASB Accounting Standards Codification Topic 606, Revenues, ( Topic 606 ), the Company performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measured the transaction price, including the constraint on variable consideration; (iv) allocated the transaction price to the performance obligations; and (v) recognized revenue when (or as) the Company satisfies each performance obligation. Durable Medical Equipment Revenue Equipment Sales and Services Revenues The Company sells durable medical equipment, replacement parts and supplies to customers and recognizes revenue at the point control is transferred through delivery to the customer. Each piece of equipment, part or supply is distinct and separately priced thus they each represent a single performance obligation. The revenue is allocated amongst the performance obligations based upon the relative standalone selling price method, however, items are typically all delivered or supplied together. The customer and, if applicable, the Payors are generally charged at the time that the product is sold, although separate layers of insurance coverage may need to be invoiced before final billings may occur. The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met. The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided. Due to the nature of the durable medical equipment business, billing adjustments customarily occur during the collections process when explanations of benefits are received by Payors, and as amounts are deferred to secondary Payors or to patient responsibility. As such, we constrain the transaction price for the difference between the amounts billed and what we believe we will collect from Payors and from patients. The transaction price therefore is predominantly based on contractual payment rates determined by the Payors. The Company does not generally contract with uninsured customers. We determine our estimates of billing adjustments based upon contractual agreements, our policies and historical experience. While the rates are fixed for the product or service with the customer and the Payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, from the patient customer. The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the Payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments we estimate will not be collected. Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain Payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. The Company constrains revenue for these estimated adjustments. During the year ended June 30, 2022, there were no material changes in estimates relating to prior periods. The payment terms and conditions of customer contracts vary by customer type and the products and services offered. F- 19 The Company may provide shipping services prior to the point of delivery and has concluded that the services represent a fulfilment activity and not a performance obligation. Returns and refunds are not accepted on either equipment sales or sleep study services. The Company does not offer warranties to customers in excess of the manufacturer’s warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not incur contract acquisition costs. The Company generally does not have any partially or unfilled performance obligations related to contracts with customers. However, during the quarter ended June 30, 2020, the Company applied for and received $ 4.4 million in advanced payments from the Centers for Medicare and Medicaid Services (CMS) under their Accelerated and Advance Payment Program, which was expanded to increase cash flow to providers of services and suppliers impacted by the 2019 Novel Coronavirus (COVID-19) pandemic. CMS began recoupments during our fiscal year 2021. We have issued recoupments of $ 3.2 million and $ 0.9 million during the years ended June 30, 2022 and 2021, respectively, leaving a remaining balance of $ 0.3 million as of June 30, 2022. These amounts are included within deferred revenue on the condensed consolidated balance sheet. The Company has no other contract liabilities as of June 30, 2022 or 2021. Included in sales and services revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the Payor. The estimate of net unbilled sales and service revenue recognized is based on historical trends and estimates of future collectability. As of June 30, 2022 and 2021, net unbilled sales and service revenue is approximately $ 0.3 million and $ 0.2 million, respectively, and is included in accounts receivable. Investment Management Revenue The Company recognizes revenue from its investment management business at amounts that reflect the consideration to which it expects to be entitled in exchange for providing services to its customer. Investment management revenue primarily consists of fees based on a percentage of assets under management, fees based on the performance of managed assets, and administrative fees. Fees are based on agreements with each investment products and may be terminated at any time by either party subject to the specific terms of each respective agreement. Management Fees The Company earns management fees based on the investment management agreement GECM has with GECC, Monomoy REIT and other private funds managed by GECM (collectively, the Funds). The performance obligation is satisfied over time as the services are rendered, since the managed vehicles simultaneously receive and consume the benefits provided as GECM performs services. Management fee rates range from 1 % to 1.50 % of the management fee assets specified within each agreement. Based on the terms of the specific agreement, management fees may be calculated and billed in arrears of the period, either monthly or quarterly. Management fee revenue is recognized over time as the services are provided. Property Management Fees Under the Monomoy REIT agreement, GECM is also entitled to 4 % of rent collected. These fees are collected monthly in arrears. Property management fee revenue is recognized over time as the services are provided. F- 20 Incentive Fees The Company earns incentive fees based on the investment management agreements GECM has with GECC, Monomoy Properties II, LLC (a feeder fund of the Monomoy REIT) and separately managed accounts. Where an investment management agreement includes both management fees and incentive fees, the performance obligation is considered to be a single obligation for both fees. Incentive fees are variable consideration associated with the investment management agreements. Incentive fees are earned based on investment performance during the period, subject to the achievement of minimum return levels or high-water marks, in accordance with the terms of the respective investment management agreements. Incentive fees range from 5.0 % to 25.0 % of the performance-based metric specified within each agreement. Because of the uncertainty of when incentive fees will be collected due to market conditions and investment performance, incentive fees are fully constrained and not recorded until received and the probability of significant reversal of the fees is eliminated in accordance with the respective investment management agreements. Effective March 31, 2022, the Company unconditionally waived all accrued incentive fees for GECC through March 31, 2022. As of June 30, 2022 , there are no incentive fees which have been earned per the terms of the investment management agreements. Administration Fees The Company earns administration fees based on the administration agreement GECM has with GECC and Monomoy REIT whereby the vehicles reimburse GECM for costs incurred in performing administrative functions. This revenue is recognized over time as the services are performed. Administrative fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation for each vehicle that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis. The Company also earns service fees based on a shared services agreement with certain portfolio companies of GECC. This revenue is recognized over time as the services are performed. Service fees are billed quarterly in arrears, which is consistent with the timing of the delivery of services and reflect agreed upon rates for the services provided. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer as the services are provided on a daily basis. Revenue Accounting Under Topic 842 Durable Medical Equipment Revenue Equipment Rental Revenue Under FASB Accounting Standards Codification Topic 842, Leases, ( Topic 842 ) rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. The Company leases durable medical equipment to customers for a fixed monthly amount on a month-to-month basis. The contractual length of the lease term varies based on the type of equipment that is rented to the customer, but generally is from 10 to 36 -months. In the case of capped rental agreements, title to the equipment transfers to the customer at the end of the contractual rental period. The customer has the right to cancel the lease at any time during the rental period for a subsequent month’s rental and payments are generally billed in advance on a month-to-month basis. Under Topic 842, rental income from operating leases is recognized on a month-to-month basis, based on contractual lease terms when collectability is reasonably assured. Certain customer co-payments are included in revenue to the extent they are considered probable of payment. The lease term begins on the date products are delivered to patients and are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private payors, and Medicaid. Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain Payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial. There were no material changes in estimates recorded in the year ended June 30, 2022, relating to prior periods. F- 21 Although invoicing typically occurs at the beginning of the monthly rental period, we recognize revenue from rentals on a daily basis. Since rental agreements can commence at any time during a given month, we defer revenue related to the remaining monthly rental period as of period end. Deferred revenue related to rentals was $ 0.9 million and $ 1.0 million as of June 30, 2022 and 2021, respectively. Included in rental revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the Payor. Net unbilled rental revenue is recognized to the extent payment is probable. As of June 30, 2022 and 2021, net unbilled rental revenue is approximately $ 0.1 million and $ 0.1 million, respectively, and is included in accounts receivable. 4. Reorganization and Financing Transactions Holding Company Reorganization On December 21, 2020 , GEC announced plans to create a new public holding company, Great Elm Group, Inc. (the Company ) by implementing a non-taxable holding company reorganization (the Holding Company Reorganization ). Following the Holding Company Reorganization, the Company became the successor issuer to GEC. On December 29, 2020, pursuant to the terms of the Agreement and Plan of Merger, dated as of December 21, 2020, among Forest (formerly GEC), the Company and Forest Merger Sub, Inc., a newly created entity for the purpose of facilitating the Merger, (as it may be amended from time to time, the Merger Agreement ), the transactions contemplated by the Merger Agreement (the Transactions ) were consummated. As a result of the Transactions, and subject to the same terms and conditions as applied immediately prior to the Transactions, each share of Forest's outstanding common stock, common stock options, restricted stock units and restricted shares were exchanged for identical instruments of the Company . Financing Transaction Following the consummation of the Holding Company Reorganization, J.P. Morgan Broker-Dealer Holdings Inc. ( JPM ), a Delaware corporation and affiliate of JPMorgan Chase & Co., Forest and the Company agreed to effect certain transactions pursuant to which JPM provided financing in an aggregate amount of $ 37.7 million. In connection with such financing, among other things: • Forest issued to JPM 35,010 newly issued shares of 9.0 % preferred stock (the Forest Preferred Stock ) for $ 1,000.00 per share; • HC LLC issued 10,090 newly issued shares of 9.0 % Series A-1 preferred stock (the Series A-1 Preferred Stock ) to DME Inc. as a distribution, which in turn distributed such preferred stock pro rata to the holders of its common stock such that 80.1 % of such preferred stock is held by Forest, 9.95 % is held by Corbel Capital Partners SBIC, L.P. ( Corbel ), and 9.95 % is held by Valley Healthcare Group, LLC ( VHG ). • HC LLC, issued to Forest 34,010 newly issued shares of 9.0 % Series A-2 preferred stock (the Series A-2 Preferred Stock ) for $ 1,000.00 per share. • HC LLC distributed to the owners of DME Inc. cash of $ 1.9 million and reimbursed GEG $ 1.3 million to cover deal costs; • Forest distributed to the Company, its sole stockholder, all of the assets and liabilities of Forest other than certain excluded assets and related liabilities, including Forest’s real estate business, and a preferred investment in the Company’s durable medical equipment business; and • JPM acquired 20 % of Forest’s common stock for a purchase price of $ 2.7 million. The Company’s wholly-owned subsidiary, DME Manager, concurrently entered into an agreement with Forest to provide advisory services in exchange for annual consulting fees of $ 0.45 million. (each collectively noted above, the JPM Transactions ). See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary. F- 22 Using proceeds from the JPM Transactions, DME Inc. paid off the term loan with Corbel (the Corbel Facility ). See Note 13 – Borrowings. Subsidiary Reorganizations On May 31, 2021, our wholly-owned subsidiary DME Holdings exchanged their 80.1 % interests in DME Inc. for an identical 80.1 % direct interest in DME Inc.’s subsidiary HC LLC, which is the sole owner of the durable medical equipment operating subsidiaries. Following the consummation of the taxable reorganization, the Company no longer has an interest in DME Inc. On June 29, 2021, GP Corp assigned the rights to the Profit Sharing Agreement with GECM, their intercompany obligation under the GP Corp. Note and other assets and liabilities to their wholly-owned subsidiary GEC GP. Subsequent to the assignment, Great Elm Group, Inc. exchanged their 98.2 % interests in GP Corp. for an identical 98.2 % direct interest in GP Corp.’s wholly-owned subsidiary GEC GP. Following the consummation of the taxable reorganization, the Company no longer has an interest in GP Corp. During the year ended June 30, 2022, the Company purchased the remaining non-controlling interests in GEC GP. As of June 30, 2022, no non-controlling interest remains outstanding. See Note 16 - Non-Controlling Interests and Preferred Stock of Subsidiary. 5. Discontinued Operations On June 23, 2021, the Company’s majority-owned indirect subsidiary FM Acquisition, entered into an agreement with Monomoy Properties Fort Myers, LLC ( Monomoy FM ) to sell the Company’s real estate business to Monomoy FM for $ 4.6 million in cash. The real estate business consists of majority-interests in two Class A office buildings totaling 257,000 square feet situated on 17 acres of land in Fort Myers, Florida. The Company acquired the real estate business in March 2018 for $ 2.7 million. After transaction costs, the gain on the sale was $ 0.3 million. Pursuant to the terms of the Purchase Agreement, the proceeds of the sale were subsequently reinvested in newly issued membership interests of Monomoy Properties, LLC ( Monomoy Fund ), a privately-held fund comprised of a portfolio of net leased industrial real estate assets. The sale of the real estate business, which has historically been disclosed as its own reportable segment, represents a strategic shift away from the direct ownership and operation of real estate properties. Accordingly, our historical financial information has been recast to present the activities of the real estate business within discontinued operations, and the assets and liabilities of the real estate business as assets and liabilities of discontinued operations. As a passive investor in Monomoy Fund and with a membership interest of approximately 5 %, we determined that we had no significant continuing involvement with the real estate business upon disposition. The following table provides a reconciliation of the Company’s net income from discontinued operations presented in the consolidated statements of operations for the year ended June 30, 2021: (in thousands) For the year ended June 30, 2021 Discontinued operations: Net revenue $ 5,005 Real estate expenses ( 505 ) Depreciation and amortization ( 1,689 ) Operating income from discontinued operations 2,811 Interest expense ( 2,536 ) Gain on sale of real estate business 263 Pretax income from discontinued operations 538 Income tax benefit 111 Net income from discontinued operations $ 649 There was no activity from discontinued operations in the consolidated statement of operations for the year ended June 30, 2022. F- 23 6. Acquisitions Investment Management Acquisitions Acquisition of Monomoy REIT Investment Management Agreement On May 4, 2022 , through its wholly-owned subsidiary, GECM, the Company acquired the investment management agreement for Monomoy Properties REIT, LLC and certain other related assets from ICAM. Monomoy REIT is a private real estate investment trust founded by ICAM, with a 108-property portfolio of diversified net leased industrial assets. The acquisition significantly increases and diversifies GECM’s assets under management. In addition to the investment management agreement, GECM acquired the assembled workforce including eleven ICAM personnel involved in the operations of the REIT, as well as the Charleston, South Carolina office lease where these employees were based. In conjunction with the acquisition, the Company made an investment of $ 15.0 million into Monomoy UpREIT, the operating partnership of Monomoy REIT. The purchase consideration included an upfront purchase price of $ 10 million financed with a combination of: (i) $ 2.5 million in newly issued shares of GEG common stock, which equals 1,369,984 shares issued at $ 1.81 per share, which is the 30 -calendar day volume-weighted average of the closing sales price ending on April 14, 2022; (ii) $ 1.25 million in shares of common stock of Great Elm Capital Corp. (“GECC”) owned by GEG and valued at the subscription price of the next GECC rights offering; and (iii) a promissory note issued by GECM in an aggregate principal amount of approximately $ 6.3 million, which bears interest at 6.5 % per annum and is payable at GECM’s option with either cash, GECC shares owned by GEG, or newly issued GEG shares (subject to shareholder approval). The Company also incurred $ 0.8 million in direct transaction costs consisting primarily of professional fees. In addition, a contingent consideration agreement requires the Company to pay up to $ 2.0 million of addition consideration to the seller if certain fee revenue thresholds are achieved during the fiscal years ending June 30, 2023 and 2024. The fair value of the contingent consideration arrangement at the acquisition date was $ 1.1 million. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model include volatility of 19.6 % and a discount rate of 6.5 %. The contingent consideration is included within accrued expenses and other liabilities in the consolidated balance sheets. The transaction was accounted for as an asset acquisition because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable intangible asset related to the investment management agreement. The value of the investment management agreement was estimated under the income approach using a multi-period excess earnings method. The key inputs in the valuation included forecasted assets under management, revenue and expenses, and a discount rate of 19.5 %. The $ 11.9 million cost of the acquisition was allocated to assets acquired on the basis of their relative fair values. Specifically, the Company recognized $ 11.3 million and $ 0.6 million of intangible assets representing the acquired investment management agreement and assembled workforce with estimated useful lives of 15 years and 10 years , respectively. Durable Medical Equipment Acquisitions Acquisition of MedOne Healthcare LLC On August 31, 2021 , through its majority-owned subsidiary, HC LLC, the Company acquired the power mobility assets of MedOne Healthcare LLC (MedOne) high service power mobility provider in Arizona. The acquisition is accounted for as a business combination. The Company expects this acquisition to achieve synergies through integrating these operations into our existing durable medical equipment operations. Operating results of the acquired businesses have been included in the consolidated statements of operations since August 31, 2021. F- 24 The purchase consideration was $ 2.0 million, comprised of $ 1.25 million paid at closing, $ 0.25 million of amounts due to seller pending satisfaction of certain indemnification obligations, and $ 0.5 million representing the acquisition date fair value of contingent consideration. The allocation of the purchase price for MedOne resulted in goodwill of $ 1.9 million. Goodwill was assigned to the durable medical equipment segment and is attributable primarily to expected synergies and the assembled workforce of the acquired business. All of the goodwill is expected to be deductible for income tax purposes. The presentation of pro forma financial disclosures are not required in connection with the MedOne acquisition. The contingent consideration arrangement requires the Company to pay up to $ 1.0 million of additional consideration to the seller if certain revenue thresholds are achieved for each of the 12 month periods ending September 1, 2022, and 2023. The fair value of the contingent consideration arrangement at the acquisition date was $ 0.5 million. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model include volatility of 23.3 % and a discount rate of 10.3 %. The contingent consideration is included within accrued expenses and other liabilities in the consolidated balance sheets. Acquisition of Advanced Medical DME, LLC and PM Sleep Lab, LLC On March 1, 2021 , through its majority-owned subsidiary, DME Inc., the Company acquired Advanced Medical DME, LLC and PM Sleep Lab, LLC (collectively, AMPM ), providers of sleep testing, Positive Air Pressure ( PAP ), and other respiratory products and services in nine locations throughout Kansas and Missouri. The acquisition is accounted for as a business combination. The Company expects to achieve synergies and costs reductions through integrating these operations into our existing durable medical equipment operations. Operating results of the acquired businesses have been included in the consolidated statements of operations since March 1, 2021. The original purchase consideration was $ 1.1 million, comprised of $ 0.4 million paid upon closing net of cash acquired, $ 0.3 placed in escrow for potential satisfaction of certain indemnification obligations, and $ 0.4 million representing the acquisition date fair value of contingent consideration. Subsequent to the acquisition, we finalized the working capital adjustment with the seller resulting in a return of $ 0.1 million to the Company from escrow. We have recorded a preliminary allocation of the purchase price for AMPM, which resulted in goodwill of $ 0.6 million and intangible assets, including trade names of $ 0.4 million. Goodwill was assigned to the durable medical equipment segment and is attributable primarily to expected synergies and the assembled workforce of the acquired business. None of the goodwill is expected to be deductible for income tax purposes. The presentation of pro forma financial disclosures are not required in connection with the AMPM acquisition. The contingent consideration arrangement requires the Company to pay up to $ 2.1 million of additional consideration to the seller if certain revenue thresholds are achieved for the 12 months ended September 1, 2022. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model as of the acquisition date include volatility of 40.0 % and a discount rate of 10.3 %. 7. Related Party Transactions Related party transactions are measured in part by the amount of consideration paid or received as established and agreed by the parties. Consideration paid for such services in each case is the negotiated value. F- 25 Investment Management The Company’s wholly-owned subsidiary, GECM, has agreements to provide administrative services and manage the investment portfolio for GECC, Monomoy REIT and other investment products. Under these agreements, GECM receives administrative fees, management fees based on the managed assets (other than cash and cash equivalents) and rent collected, and incentive fees based on the performance of those assets. See Note 3 – Revenue for additional discussions of the fee arrangements. The Company’s wholly-owned subsidiary, GEO GP serves as the general partner of Great Elm Opportunities Fund I, LP ( GEOF ), a Delaware multi-series limited partnership. GECM serves as the investment manager of GEOF. As the general partner, GEO GP provides administrative services and oversees GECM’s management of the investment portfolio of GEOF. The Company’s wholly-owned subsidiary, GECM, serves as the managing member of Great Elm SPAC Opportunity Fund, LLC ( GESOF ), a Delaware limited liability company, and provides administrative services and manages the investment portfolio of GESOF. The Company has determined that GEOF, each series of GEOF, and GESOF are VIEs and that the criteria for consolidation are met for GEOF Series C, which was launched in November 2020 and subsequently merged into GESOF, which was launched in February 2021. The operations of each of these consolidated funds (the Consolidated Funds ) are included in our consolidated financial statements. See Note 2 – Summary of Significant Accounting Policies for additional details. In July 2022, GESOF liquidated and the Company received a distribution of cash and equity investments. The Company has retained the specialized investment company accounting guidance under US GAAP with respect to the Consolidated Funds. As such, investments of the Consolidated Funds are included in the condensed consolidated balance sheets at fair value and the net unrealized gain (loss) on those investments is included as a component of other income on the condensed consolidated income statement. Non-controlling interests in these Consolidated Funds are included in net loss attributable to non-controlling interest. As of June 30, 2022 no single issuer or investment of the Consolidated Funds had a fair value greater than 5 % of the Company’s total consolidated assets. Additionally, the Company receives dividends from its investment in GECC and Monomoy UpREIT and earns unrealized profits and losses based on the mark-to-market performance of its investments in GECC and Monomoy UpREIT. See Note 8 – Fair Value Measurements. The following tables summarize activity and outstanding balances between the managed investment products and the Company. For the years ended June 30, (in thousands) 2022 2021 Net realized and unrealized gain (loss) on investments $ ( 7,920 ) $ 155 Net realized and unrealized gain (loss) on investments of consolidated funds ( 525 ) 545 Dividend income 2,809 2,954 As of June 30, (in thousands) 2022 2021 Dividends receivable $ 612 $ 554 Investment management revenues receivable 1,241 936 Receivable for reimbursable expenses paid 592 297 F- 26 Outstanding receivables are included in related party receivables in the consolidated balance sheets. Outstanding receivables from the Consolidated Funds are eliminated in consolidation. As of June 30, 2022 and 2021, the Company had $ 0.1 million and $ 0.1 million, respectively, in receivable for reimbursable expenses paid on behalf of the Consolidated Funds. The Company owns approximately 35.4 % of the outstanding shares (or 2,687,487 shares) of GECC. Certain officers and directors of GECC are also officers and directors of GEG. Matthew A. Drapkin is a director of our Board and also the Chairman of GECC's Board of Directors, and Adam M. Kleinman is our President and Chief Operating Officer as well as the Chief Compliance Officer of GECC. On June 13, 2022, GECC completed a non-transferable rights offering in which the Company and its subsidiaries received 1,400,000 shares at a price of $ 12.50 per share for an aggregate total of $ 17.5 million. On May 4, 2022 the Company purchased the investment management agreement of the Monomoy REIT and other assets from ICAM for consideration of $ 11.1 million, inclusive of a $ 6.3 million 6.5 % promissory note ( Seller Note ) and potential earnout payments. Interest accrued on the Seller Note for the year ended June 30, 2022 was $ 0.1 million . The assembled workforce acquired in the transaction consisted of former ICAM employees. In conjunction with the transaction, GECM entered into a services agreement with ICAM. Jason W. Reese, the Executive Chairman of the Company’s Board of Directors, is the Chief Executive Officer of ICAM. Costs incurred under this agreement are reimbursed by the Monomoy REIT. For the year ended June 30, 2022 , such costs were $ 0.1 million. Shortly after the transaction, our existing investment in Monomoy Fund (which continues to be managed by ICAM) was redeemed and proceeds reinvested in Monomoy UpREIT. In October 2020, GECM entered into a shared personnel and reimbursement agreement with Imperial Capital Asset Management, LLC ( ICAM ). Costs incurred under this agreement are included in investment management expenses in the condensed consolidated statement of operations. For the years ended June 30, 2022 and 2021 , such costs were $ 1.1 million and $ 0.4 million, respectively. The Company also granted restricted stock awards to an employee of ICAM with a grant date fair value of $ 0.2 million during the year ended June 30, 2022 as additional compensation for consulting services performed under the shared personnel and reimbursement agreement with ICAM. Durable Medical Equipment In connection with the acquisition of the durable medical equipment businesses in September 2018, DME Inc. and its subsidiaries entered into the Corbel Facility. Jeffrey S. Serota, a member of the Company’s Board of Directors, serves as Vice Chairman to Corbel Capital Partners, an affiliate of Corbel. Corbel previously held an interest in Northwest and was one of the sellers in our acquisition of the business. As a result of the acquisition, at June 30, 2022 Corbel holds a non-controlling interest in HC LLC. Pursuant to the Corbel Facility, Corbel was paid a structuring fee and a quarterly monitoring fee. In conjunction with the JPM Transactions, the Corbel Facility was repaid early on December 29, 2020, and DME Inc. paid a deferred structuring fee as well as a prepayment penalty. See Note 13 - Borrowings for additional information on the Corbel Facility and Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries. In connection with the acquisition of the durable medical equipment businesses, the Company issued non-controlling interests in DME Inc. to the former owners, including Corbel discussed above. These non-controlling interests in DME Inc. became non-controlling interests in HC LLC in May 2021. See Note 4 – Reorganization and Financing Transactions. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary. General Corporate On August 31, 2021, the Company entered into a financial advisory agreement with Imperial Capital, LLC. The agreement included a retainer fee of $ 0.1 million which was paid during the current fiscal period as well as certain success-based fees related to potential future transactions. F- 27 Additionally, the Company received dividends and realized gain on its investment in Monomoy Properties, which it held for a portion of the year ended June 30, 2022 Monomoy Properties is managed by ICAM. The following table summarizes the Company's activity related to Monomoy Properties (in thousands) For the year ended June 30, 2022 Net realized gain on investment $ 349 Dividend income 350 In conjunction with the JPM Transactions, on December 29, 2020 Forest sold Forest Preferred Stock and the Company sold common stock in Forest to JPM for cash consideration of $ 35.0 million and $ 2.7 million, respectively. As a result of these transactions, JPM holds a non-controlling interest in Forest. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries. On December 18, 2020, the Company purchased from JPM a 21 % common stock interest in Ligado Networks, LLC ( Ligado ), a privately-held Company. The common stock interest does not convey the ability to exercise significant influence over Ligado, and therefore does not require accounting in accordance with the equity method. We have elected to account for this investment, which does not have a readily-determinable fair value, at cost minus impairment. This investment is included in prepaid and other current assets on our consolidated balance sheet. Discontinued Operations On June 23, 2021, the Company sold its real estate business to Monomoy FM. Monomoy FM is a majority-owned subsidiary of Monomoy Fund, and pursuant to the purchase agreement the Company subsequently invested the proceeds of the sale in Monomoy Fund. Monomoy Fund is managed by ICAM. See Note 5 – Discontinued Operations. 8. Fair Value Measurements Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. US GAAP provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: ▪ Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. ▪ Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. ▪ Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. All financial assets or liabilities that are measured at fair value on a recurring and no n-recurring basis have been segregated into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date. F- 28 The assets and liabilities measured at fair value on a recurring and no n-recurring basis are summarized in the tables below: Fair Value as of June 30, 2022 Level 1 Level 2 Level 3 Total Assets: Equity investments $ 27,678 $ - $ - $ 27,678 Equity investments of Consolidated Funds 1,797 - - 1,797 Total assets within the fair value hierarchy $ 29,475 $ - $ - $ 29,475 Investments valued at net asset value $ 20,363 Total assets $ 49,838 Liabilities: Participation feature of HC LLC Series A-2 Preferred Stock $ - $ - * * Contingent consideration liability - - 1,767 1,767 Total liabilities $ - $ - $ 1,767 $ 1,767 * Balance eliminates in consolidation. Fair Value as of June 30, 2021 (in thousands) Level 1 Level 2 Level 3 Total Assets: Equity investments $ 19,444 $ - $ - $ 19,444 Equity investments of Consolidated Funds 26,490 26,490 Total assets $ 45,934 $ - $ - $ 45,934 Investments valued at net asset value $ 4,600 Total assets $ 50,534 Liabilities: Participation feature of HC LLC Series A-2 Preferred Stock $ - $ - * * Contingent consideration liability - - 271 271 Total liabilities $ - $ - $ 271 $ 271 There were no transfers between levels of the fair value hierarchy during the years ended June 30, 2022 and 2021. The following is a reconciliation of changes in contingent consideration, a Level 3 liability: For the years ended June 30, (in thousands) 2022 2021 Beginning Balance $ 271 $ - Additions 1,617 397 Payments - - Change in fair value ( 121 ) ( 126 ) Ending Balance $ 1,767 $ 271 The valuation techniques applied to investments held by the Company and by the Consolidated Funds vary depending on the nature of the investment. Equity and equity-related securities Securities traded on a national securities exchange are stated at the close price on the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level 1. F- 29 Investments in private funds The Company values investments in private funds using net asset value ( NAV ) as reported by each fund’s investment manager. The private funds calculate NAV in a manner consistent with the measurement principles of FASB Topic 946, Financial Services – Investment Companies , as of the valuation date. Investments valued using NAV as a practical expedient are not categorized within the fair value hierarchy. As of June 30, 2022, investments in private funds consist of our investment in Monomoy UpREIT and Sharp Alpha Fund I, LP ( Sharp Alpha ), a closed-end limited partnership focused on gaming technologies. Monomoy UpREIT allows redemptions annually with 90 days’ notice subject to a one-year lockup from the date of initial investment. Sharp Alpha does not allow for redemptions. Distributions will be received as the underlying assets are liquidated over the life of the fund, which is expected to be approximately 10 years. As of June 30, 2022 there are no unfunded commitments. As of June 30, 2021, investments in private funds consisted of our investment in Monomoy Fund, an industrial real estate-focused fund. Redemptions are allowed annually with 90 days' notice subject to a one-year lockup from the date of initial investment. There were no unfunded commitments. Contingent consideration In conjunction with the acquisition of AMPM on March 1, 2021, the Company entered into a contingent consideration agreement that requires the Company to pay up to $ 2.1 million if certain revenue thresholds of the acquired business are achieved for the 12 months ending September 1, 2022. As of June 30, 2022, projected revenues through September 1, 2022 are not expected to be achieved and the fair value of the contingent consideration has been updated to zero , resulting in a $ 0.3 million benefit which is included in durable medical equipment other operating expenses. In conjunction with the acquisition of MedOne on August 31, 2021, the Company entered into a contingent consideration agreement that requires the Company to pay up to $ 1.0 million if certain revenue thresholds of the acquired business are achieved for the 12 months ending September 1, 2022 and September 1, 2023. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model as of June 30, 2022 include volatility of 27.6 % and a discount rate of 7.6 %. The fair value adjustments during the year ended June 30, 2022 resulted in a $ 0.2 million charge which is included in durable medical equipment other operating expenses. In conjunction with the acquisition of the Monomoy REIT investment management agreement, the Company entered into a contingent consideration agreement that requires the Company to pay up to $ 2.0 million if certain fee revenue thresholds are achieved during fiscal years ended June 30, 2023 and 2024. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation model. The key assumptions in applying the Monte Carlo simulation model as of June 30, 2022 include revenue forecasts, volatility of 19.6 % and a discount rate of 6.5 %. The contingent consideration is included within the other liabilities in the consolidated balance sheets. F- 30 Participation feature of HC LLC Series A-2 Preferred Stock On December 29, 2020, in conjunction with the JPM Transactions, the Company issued HC LLC Series A-2 Preferred Stock to our consolidated subsidiary, Forest. See Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiaries. An embedded derivative was identified in the instrument requiring bifurcation from the host instrument as a derivative to be carried at fair value. The value of the derivative related to a participation feature upon the sale of the durable medical equipment business. As of the issuance date, the fair value was determined using an option pricing model based on the transaction price. The key assumptions used in the option pricing model include a volatility rate of 72.7 % and an option term of 3 years. Subsequent to the issuance date, the fair value of this derivative is determined at each balance sheet date using an option pricing model based on the estimated value of HC LLC. This fair value is derived from a discounted cash flow income approach and a guideline public company market approach. The key assumptions in applying the valuation approach as of June 30, 2022 and 2021, include financial forecasts of the durable medical equipment business, a discount rate of 13.0 % and 14.5 %, respectively, and a volatility rate of 59.1 % and 50.4 %, respectively (level 3 inputs in accordance with the US GAAP fair value hierarchy). The fair value of the embedded derivative as of June 30, 2022 and 2021 was $ 7.9 million and $ 5.8 million, respectively. Since the HC LLC Series A-2 Preferred Stock are issued to Forest, a consolidated subsidiary, the instruments and their effects on our operations have been eliminated in consolidation and therefore the valuation of the participation feature is reflected as zero within the table above. However, this valuation does impact our segment results and non-controlling interest accounts. See Note 13 - Borrowings for additional discussion related to the fair value of notes payable. The carrying value of all other financial assets and liabilities approximate their fair values. 9. Fixed Assets The Company’s fixed assets consist of its medical equipment held for rental, furniture and fixtures, and leasehold improvements used in its operations. The following tables detail the Company’s fixed assets: (in thousands) June 30, 2022 June 30, 2021 Property and Equipment Leasehold improvements $ 970 $ 835 Vehicles 162 172 Computer equipment and software 642 500 Furniture and fixtures 590 422 Sleep study equipment 594 593 2,958 2,522 Accumulated depreciation ( 2,420 ) ( 1,541 ) Net carrying amount $ 538 $ 981 Medical Equipment Held for Rental Medical equipment held for rental $ 16,593 $ 14,933 Accumulated depreciation ( 9,089 ) ( 7,542 ) Net carrying amount $ 7,504 $ 7,391 The following table reconciles depreciation expense included in the following lines of the consolidated statements of operations to total depreciation expense for each period presented. For the years ended June 30, (in thousands) 2022 2021 Depreciation and amortization $ 563 $ 693 Cost of durable medical equipment rentals 6,527 6,286 Total depreciation expense $ 7,090 $ 6,979 F- 31 10. Goodwill and Other Intangible Assets The Company’s investment management and durable medical equipment segments include identifiable intangible assets acquired through acquisitions in prior years. Goodwill presented on the consolidated balance sheet consists only of the goodwill acquired as part of the acquisitions of the durable medical equipment businesses. The changes in the carrying value of goodwill are as follows: For the years ended June 30, (in thousands) 2022 2021 Beginning Balance $ 50,536 $ 50,010 Acquisitions 1,927 648 Purchase accounting adjustment - ( 122 ) Ending Balance $ 52,463 $ 50,536 The Company’s annual impairment assessment date for goodwill is April 1. No impairment triggering events have been identified since our prior year annual impairment analysis. In the current year, we performed a quantitative impairment test for our annual impairment assessment. Based on the analyses performed, the fair value of the durable medical equipment reporting unit exceeded the carrying value by 34 % and no impairment was noted. The fair value of this reporting unit was derived using a combination of present value of estimated cash flows and the valuations and prices of comparable businesses. The discount rate used in this analysis was 13.0 % and revenue and EBITDA multiples averaged 1.2 x and 7.5 x, respectively. The following tables provide additional detail related to the Company’s acquired identifiable intangible assets: As of June 30, 2022 As of June 30, 2021 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Durable Medical Equipment Tradename $ 9,060 $ ( 3,443 ) $ 5,617 $ 9,060 $ ( 2,511 ) $ 6,549 Hospital Contracts 90 ( 49 ) 41 90 ( 15 ) 75 Non-compete agreements 1,370 ( 1,107 ) 263 1,370 ( 890 ) 480 10,520 ( 4,599 ) 5,921 10,520 ( 3,416 ) 7,104 Investment Management Investment management agreements 15,264 ( 2,753 ) 12,511 3,900 ( 2,293 ) 1,607 Assembled workforces 1,103 ( 364 ) 739 526 ( 309 ) 217 16,367 ( 3,117 ) 13,250 4,426 ( 2,602 ) 1,824 Total $ 26,887 $ ( 7,716 ) $ 19,171 $ 14,946 $ ( 6,018 ) $ 8,928 Aggregate Amortization Expense (in thousands) : For the year ended June 30, 2022 $ 1,698 For the year ended June 30, 2021 1,690 Estimated Future Amortization Expense (in thousands) : For the year ending June 30, 2023 $ 2,283 For the year ending June 30, 2024 2,084 For the year ending June 30, 2025 1,974 For the year ending June 30, 2026 1,912 For the year ending June 30, 2027 1,838 Thereafter 9,080 Total 19,171 F- 32 11. Lessor Operating Leases Medical Equipment Leases Through its majority-owned subsidiary HC LLC, and the subsidiaries of HC LLC, the Company owns medical equipment which is leased to customers. The Company’s customers consist primarily of patients through their clinical providers including medical centers, clinics and hospices and the Company has lease arrangements with these patients. In addition, the arrangements between the Company and its customers are impacted by arrangements between the Company and Payors. The Payors may cover a portion or all of the rental payments under the agreements between the Company and its customers. The patient is responsible for any residual co-payments. The lease terms may be for a pre-determined time period, generally 10 months to 36 months ; however, the customer may cancel the lease at any time and for any reason without penalty and therefore, the Company treats all leases as month-to-month leases. Upon termination of the lease, the equipment, if not aged beyond its useful life, may be refurbished and subsequently sold or leased to another customer. As the leases are month-to-month, there are no future lease receivables under the terms of the current leases. 12. Lessee Operating Leases All of the Company’s leases are operating leases. Certain of the leases have both lease and non-lease components. The Company has elected to account for the lease component and the non-lease components as a single combined lease component for all classes of underlying assets. The following table provides additional details of the leases presented in the balance sheets: (in thousands) June 30, 2022 June 30, 2021 Facilities Right of use assets $ 3,400 $ 5,121 Current portion of lease liabilities 1,475 1,864 Lease liabilities, net of current portion 2,137 3,532 Total liabilities $ 3,612 $ 5,396 Weighted-average remaining life 3.1 years 3.3 years Weighted-average discount rate 10.8 % 11.0 % Vehicles Right of use assets $ 315 $ 87 Current portion of lease liabilities 77 29 Lease liabilities, net of current portion 238 58 Total liabilities $ 315 $ 87 Weighted-average remaining life 4.2 years 3.9 years Weighted-average discount rate 6.3 % 9.8 % Equipment Right of use assets $ 7 $ 33 Current portion of lease liabilities 7 27 Lease liabilities, net of current portion - 6 Total liabilities $ 7 $ 33 Weighted-average remaining life 0.8 years 1.0 years Weighted-average discount rate 12.5 % 12.5 % F- 33 As of June 30, 2022, the Company had total right of use assets of $ 3.7 million and lease liabilities of $ 3.9 million (consisting of $ 1.5 million in current portion of lease liabilities and $ 2.4 million in lease liabilities, net of current portion) on the consolidated balance sheet related to the leases discussed herein. As of June 30, 2021, the Company had total right of use assets of $ 5.2 million and lease liabilities of $ 5.5 million (consisting of $ 1.9 million in current portion of lease liabilities and $ 3.6 million in lease liabilities, net of current portion) on the consolidated balance sheet related to the leases discussed herein. The discount rate for each lease is based on the collateralized borrowing rate at the inception of the lease. Operating lease costs are included in the operating expense associated with the business segment leasing the asset on the statements of operations and are included in cash flows from operating activities on the statements of cash flows. Certain operating leases include variable lease costs which are not material and are included in operating lease costs. Additional details are presented in the following table: For the years ended June 30, (in thousands) 2022 2021 Facilities Operating lease cost $ 2,266 $ 2,469 Cash paid for operating leases 1,795 1,973 Vehicles Operating lease cost $ 67 $ 50 Cash paid for operating leases 67 50 Equipment Operating lease cost $ 28 $ 61 Cash paid for operating leases 28 61 The following table summarizes the Company’s undiscounted cash payment obligations for its operating leases: (in thousands) For the year ending June 30, 2023 1,887 For the year ending June 30, 2024 1,646 For the year ending June 30, 2025 691 For the year ending June 30, 2026 622 For the year ending June 30, 2027 143 Thereafter 19 Total lease payments $ 5,008 Imputed interest ( 1,074 ) Total lease liabilities $ 3,934 Durable Medical Equipment The facility leases include offices, retail and warehouse space and sleep labs. The facility leases have original or amended terms ranging from 12 to 96 months , some of which include an additional option to extend the lease for up to 120 months. Certain of these leases have variable rental payments tied to a consumer price index or include additional rental payments for maintenance costs, taxes and insurance, which are accounted for as variable rent. The vehicles leases have original lease terms of 60 months from the commencement date of each lease with no option to extend. Each lease may be terminated by the lessee with 30-days’ notice after the first 13 months of the lease subject to certain early termination costs, including residual value guarantees. The lease costs include variable payments for taxes and other fees. Equipment leases consist of office equipment with original lease terms ranging from 36 to 48 months from the commencement date of each lease and may include an option to extend or purchase at the end of the lease term. Certain of these leases include additional rental costs for taxes, insurance and additional fees in addition to the base rental costs. F- 34 Investment Management A lease for office space located in Charleston, South Carolina was assumed as part of the acquisition of the Monomoy REIT investment management agreement in May 2022. The non-cancellable lease term expires October 1, 2024 , and lease payments are approximately $ 3 thousand per month. General Corporate The Company entered into a lease for office space located in Waltham, MA. This office space is allocated between the investment management and general corporate segments. On the commencement date of the lease, the non-cancellable term was for eighty-eight months from the occupancy date of June 1, 2017 and contains an option to extend for an additional sixty-month period. The lease payments commenced on October 1, 2017, four months after the Company began to occupy the space. On an annual basis, the lease payments increase at an average rate of approximately 2.4 % from $ 28 to $ 32 thousand per month. 13. Borrowings Related party borrowings of the Company’s subsidiaries are summarized in the following table: As of June 30, (in thousands) Subsidiaries 2022 2021 Seller Note GECM $ 6,270 $ - GP Corp. Note GEC GP * * Total principal $ 6,270 $ - Unamortized debt issuance cost - - Total long-term related party notes payable 6,270 - Less current portion of related party notes payable - - Related party notes payable, net of current portion $ 6,270 $ - *Balance eliminates in consolidation. The Company’s and subsidiaries’ other outstanding borrowings are summarized in the following table: As of June 30, (in thousands) Subsidiaries 2022 2021 GEGGL Notes GEG $ 26,945 $ - DME Revolver HC LLC and subsidiaries - - Equipment Financing HC LLC and subsidiaries 2,993 2,041 Total principal $ 29,938 $ 2,041 Unamortized debt discounts and issuance costs ( 1,413 ) - Total other outstanding borrowings 28,525 2,041 Less current portion of other outstanding borrowings ( 2,993 ) ( 1,974 ) Other outstanding borrowings, net of current portion $ 25,532 $ 67 The Company incurred interest expense on these borrowings of $ 4.0 million and $ 3.2 million for the years ended June 30, 2022 and 2021, respectively. F- 35 The Company’s aggregate future required principal debt repayments are summarized in the following table: (in thousands) Principal Due For the year ending June 30, 2023 $ 2,993 For the year ending June 30, 2024 6,270 For the year ending June 30, 2025 - For the year ending June 30, 2026 - For the year ending June 30, 2027 26,945 Thereafter - Total $ 36,208 Additional details of each borrowing by operating segment are discussed below. Durable Medical Equipment In connection with the acquisition of DME Inc., the Company assumed a secured note ( Corbel Facility ) with a principal balance of $ 8.5 million, which was amended and increased to $ 25 million concurrent with the closing of the acquisition described in Note 6 – Acquisitions. In addition, the Company assumed and expanded a revolving line of credit agreement with Banc of California (formerly Pacific Mercantile Bank) ( DME Revolver ) with a principal balance of $ 0.8 million, which was amended and increased to $ 6.3 million at the date of acquisition. The Corbel Facility was repaid on December 29, 2020. The repayment included deferred structuring fees of $ 0.6 million, prepayment premiums and settlement fees of $ 1.0 million, and lender legal fees of $ 0.1 million. In addition, upon repayment, the Company wrote off the remaining unamortized debt issuance costs of $ 0.2 million, resulting in an aggregate $ 1.9 million loss on extinguishment of debt. The Corbel Facility was held by Corbel, a related party, which also holds a non-controlling interest in DME Inc. and HC LLC Series A-1 Preferred Stock. See Note 7 – Related Party Transactions and Note 16 – Non-Controlling Interests and Preferred Stock of Subsidiary. Principal payments and interest expense incurred on the Corbel Facility for the year ended June 30, 2021 were $ 25.1 million and $ 1.3 million, respectively. There were no borrowings outstanding under the DME Revolver at June 30, 2022 . The DME Revolver allows for borrowings up to $ 10 million, subject to a fixed percentage of qualifying accounts receivables and inventories related to the durable medical equipment business operations. Borrowings under the line of credit are due on November 29, 2022 and accrue interest at a variable rate of the prime rate plus 0.40 % per annum . At June 30, 2022 the interest rate was 5.2 % . Interest is payable monthly in arrears. The Company has the option to prepay the borrowings without any penalty. The borrowings under the DME Revolver are collateralized by the assets of the durable medical equipment business and the Company is required to meet certain financial covenants. The DME Revolver includes covenants that restrict HC LLC’s and its subsidiaries’ business operations to its current business, limit additional indebtedness, liens, asset dispositions and investments, require compliance and maintenance of licenses and government approvals and other customary conditions. Events of default include the failure to pay amounts when due, bankruptcy, or violation of covenants, including a change in control of HC LLC. HC LLC must also comply with a fixed-charge coverage and leverage ratio financial covenants, which are based in part on the HC LLC EBITDA levels. The Company was in compliance with all material covenants and restrictions at June 30, 2022. F- 36 HC LLC’s operating subsidiaries also utilize equipment financing debt to fund certain inventory and equipment purchases from suppliers. These equipment financing debt agreements are entered into with 3rd party banks and are generally payable in equal installments over terms of one to three years , depending on the nature of the underlying purchases being financed. The debt is secured by the inventory and equipment, as applicable, of the operating subsidiaries entering into the agreements, and the long-term agreements have implicit interest rates between 7 – 8 %. The Company financed $ 6.4 million and $ 3.6 million in inventory and equipment through such financing agreements during the years ended June 30, 2022 and 2021, respectively. Investment Management On May 4, 2022 as part of the consideration paid to acquire the Monomoy REIT asset management agreement, GECM issued ICAM a $ 6.3 million promissory note (the Seller Note ). The Seller Note is due on August 4, 2023 and is payable at GECM’s option with either cash, GECC shares owned by GEG, or newly issued GEG shares (subject to shareholder approval). There are no prepayment penalties. The Seller Note bears interest at 6.5 %, which is paid quarterly. During the year ended June 30, 2022, the Company incurred $ 0.1 million in interest expense on the Seller Note. There were no principal payments made during the year ended June 30, 2022. As part of the entry into the investment management business, the Company acquired certain assets from MAST Capital Management, LLC ( MAST Capital ) and in consideration for those assets, GP Corp. issued a senior secured note payable (the GP Corp. Note ). The GP Corp. Note matures in November 2026 , accrues interest at a variable rate of three-month LIBOR plus 3.0 % per annum and is secured by a profit sharing agreement related to GECM’s management of GECC. On March 10, 2021, GEG purchased the GP Corp. Note as well as non-controlling interests in GP Corp. and certain board appointment rights from MAST Capital. In exchange, GEG issued $ 2.3 million of Convertible Notes. As MAST Capital was a related party, no gain was recorded on the transaction. The difference in carrying value between the instruments purchased (including the GP Corp. Note and MAST Capital’s non-controlling interests) and that of the newly issued convertible notes was treated as a capital contribution and recorded to additional paid in capital in the amount of $ 0.6 million. During the year ended June 30, 2021, the Company incurred interest expense of $ 0.1 million on the GP Corp. Note. Principal payments made and interest expense accrued after March 10, 2021 are eliminated in consolidation. General Corporate On June 9, 2022, we issued $ 26.9 million in aggregate principal amount of 7.25 % Notes due 2027 (the GEGGL Notes ), which included $ 1.9 million of GEGGL Notes issued in connection with the partial exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GEGGL Notes outstanding as of June 30, 2022 is $ 26.9 million . The GEGGL Notes are unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The unsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Convertible Notes and any other future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the GEGGL Notes on March 31, June 30, September 30 and December 31 of each year. The GEGGL Notes will mature on June 30, 2027 . The GEGGL Notes can be called on, or after, June 30, 2024. Holders of the Notes do not have the option to have the Notes repaid prior to the stated maturity date. The Notes were issued in minimum denominations of $ 25 and integral multiples of $ 25 in excess thereof. The GEGGL Notes include covenants that limit additional indebtedness or the payment of dividends subject to compliance with a net consolidated debt to equity ratio of 2 :1. As of June 30, 2022 our consolidated debt to equity ratio is 1.2:1. F- 37 14. Convertible Notes On February 26, 2020, the Company issued Convertible Notes at par with an aggregate principal balance of $ 30 million due February 26, 2030 (the Convertible Notes ). In addition, on March 10, 2021, the Company issued additional Convertible Notes to MAST Capital in an aggregate principal amount of $ 2.3 million. As of June 30, 2022, the total principal balance of Convertible Notes outstanding was $ 36.1 million , including cumulative interest paid-in-kind. The Convertible Notes are held by a consortium of investors, including $ 15.1 million issued to certain related parties. As of June 30, 2022, such Convertible Notes issued to related parties include: ▪ $ 6.7 million issued to entities associated with Matthew A. Drapkin, including funds managed by Northern Right Capital Management, L.P. ( Northern Right ), a significant shareholder. Mr. Drapkin, a member of the Company’s Board of Directors, is the Chief Executive Officer of Northern Right. ▪ $ 7.2 million issued to entities associated with Jason W. Reese, including funds managed by ICAM, a significant shareholder. ▪ $ 0.7 million issued to entities associated with Eric J. Scheyer, a member of the Company’s Board of Directors. ▪ $ 0.5 million issued to MAST Capital. The Convertible Notes accrue interest at 5.0 % per annum, payable semiannually in arrears on June 30 and December 31, commencing June 30, 2020, in cash or in kind at the option of the Company. Each $1,000 principal amount of the Convertible Notes are convertible into 288.0018 shares of the Company’s common stock, subject to the terms therein, prior to maturity at the option of the holder. The Company may, subject to compliance with the terms of the Convertible Notes, effect the conversion of some or all of the Convertible Notes into shares of common stock, subject to certain liquidity and pricing requirements, as specified in the Convertible Notes. The embedded conversion feature in the Convertible Notes qualifies for the scope exception to derivative accounting in ASC Topic 815, Derivatives and Hedging , for certain contracts involving a reporting entity’s own equity. The Company incurred $ 1.2 million in issuance costs on the original issuance. The debt issuance costs are being amortized over the 10-year Convertible Notes term and are netted with the principal balance within convertible debt on our consolidated balance sheet. The Company incurred interest expense of $ 1.8 million and $ 1.7 million related to the Convertible Notes for the years ended June 30, 2022 and 2021, respectively, inclusive of non-cash interest related to amortization of discount. Interest payments were paid-in-kind by issuing $ 1.7 million and $ 1.6 million of additional Convertible Notes to holders for the years ended June 30, 2022 and 2021, respectively. As of June 30, (in thousands) 2022 2021 Convertible Notes principal $ 36,085 $ 34,346 Unamortized issuance costs ( 898 ) ( 1,013 ) Total Convertible Notes 35,187 33,333 F- 38 15. CARES Act On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 expanded certain benefits made available under the enhanced Coronavirus Aid, Relief, and Economic Security Act, including modifying and extending the Employee Retention Credit (ERC). As modified, the ERC provides eligible employers with less than 500 employees a refundable tax credit against the employer’s share of social security taxes. The ERC is equal to 70 % of qualified wages paid to employees during calendar 2021 for a maximum credit per employee of $ 7,000 per employee for each calendar quarter through September 30, 2021. During the year ended June 30, 2021, the Company claimed ERCs of $ 5.0 million, consisting of $ 4.8 million recognized as a reduction to operating expenses and $ 0.2 million acquired in purchase accounting. Such claimed ERCs not settled prior to June 30, 2021 in the amount of $ 2.8 million were settled shortly thereafter and are disclosed within prepaid and other current assets on our consolidated balance sheet. In addition to claiming ERC’s during the prior fiscal year, the Company claimed and collected additional ERCs of $ 2.4 million during the year ended June 30, 2022. We have accounted for such proceeds as in-substance government grants by analogizing to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance . 16. Non-Controlling Interests and Preferred Stock of Subsidiary Holders of non-controlling interests ( NCI ) or preferred stock in a subsidiary of the Company hold certain rights, which result in the classification of the securities as either liability, temporary equity or permanent equity. The following table summarizes the non-controlling interest balances on the consolidated balance sheets: As of June 30, (in thousands) 2022 2021 HC LLC Temporary equity 2,225 2,639 Permanent equity 2,225 2,639 Total HC LLC 4,450 5,278 GEC GP Permanent equity - ( 79 ) Consolidated Funds Permanent equity 642 4,228 Forest Permanent equity 3,666 2,761 Total $ 8,758 $ 12,188 F- 39 The following table summarizes the net income (loss) attributable to the non-controlling interests on the consolidated statements of operations: For the years ended June 30, (in thousands) 2022 2021 DME Inc. Temporary equity - ( 263 ) Permanent equity - ( 263 ) Total DME Inc. - ( 526 ) HC LLC Temporary equity ( 414 ) - Permanent equity ( 414 ) - Total HC LLC ( 828 ) - GP Corp. Permanent equity - ( 87 ) GEC GP Permanent equity ( 6 ) ( 1 ) Consolidated Funds Permanent equity ( 215 ) ( 96 ) Forest Permanent equity 905 62 FM Holdings Permanent equity - 53 Total $ ( 144 ) $ ( 595 ) HC LLC and DME Inc. – Non-controlling interest classified as temporary equity In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued a 9.95 % common stock equity ownership in DME Inc. The holder of the interest has a board observer rights for the DME Inc. board of directors, but no voting rights. DME Inc. has the right of first offer if the holder desires to sell the security and in the event of a sale of DME Inc., the holder must sell their securities (drag along rights) and has the right to participate in sales of DME Inc. securities (tag along rights). In addition, upon the seventh anniversary of issuance date, if (i) the holder owns at least 50% of the common shares issued to it at the closing of the transaction, (ii) an initial public offering of DME Inc. has not commenced and (iii) the holder has not had an earlier opportunity to sell its shares at their fair market value, the holder has the right to request a marketing process for a sale of DME Inc. and has the right to put its common shares to DME Inc. at the price for such shares implied by such marketing process. The Company also has the right to call the holder’s common shares at such price. The holder of the non-controlling interest is entitled to participate in earnings of DME Inc. and is not required to fund losses. As the redemption is contingent upon future events outside of the Company’s control which are not probable, the Company has classified the non-controlling interest as temporary equity and its fair value on the date of issuance, adjusted for any earnings in DME Inc. As a result of the reorganization discussed in Note 4 – Reorganization and Financing Transactions the non-controlling interests in DME Inc. became non-controlling interests in HC LLC on May 31, 2021. The holder of this non-controlling interest, Corbel, is also the holder of the Series A-1 Preferred Stock and previously was the holder of the Corbel Facility. See Note 7 – Related Party Transactions and Note 13 – Borrowings. HC LLC and DME Inc. – Non-controlling interest classified as permanent equity In connection with the acquisition of the acquired businesses on September 7, 2018, the Company issued one of the former owners, a 9.95 % common stock equity ownership in DME Inc. The rights are consistent with the non-controlling interest classified as temporary equity, other than the holder does not have a contingent put right. Accordingly, Company has classified the non-controlling interest as permanent equity at its fair value on the date of issuance, adjusted for any earnings in DME Inc. F- 40 As a result of the reorganization discussed in Note 4 – Reorganization and Financing Transactions the non-controlling interests in DME Inc. became non-controlling interests in HC LLC on May 31, 2021. GP Corp. – Non-controlling interest classified as permanent equity In connection with the acquisition of the investment management business in November 2016, the Company issued certain affiliates and employees of the Company a 19.9 % interest in GP Corp. During the year ended June 30, 2021, the Company repurchased 18.1 % of such interests, leaving a 1.8 % non-controlling interest in GP Corp. as of June 29, 2021. Great Elm Group, Inc’s 98.2 % interest in GP Corp was then exchanged for a direct interest in GP Corp’s wholly-owned GEC GP. Following the consummation of the reorganization on June 29, 2021, the Company no longer has an interest in GP Corp. GEC GP – Non-controlling interest classified as permanent equity As described above, on June 29, 2021 Great Elm Group, Inc. exchanged their 98.2 % interests in GP Corp for an identical 98.2 % direct interest in GP Corp’s wholly-owned subsidiary GEC GP. GEC GP owns the rights to the Profit Sharing Agreement with GECM as well as an intercompany obligation under the GP Corp. Note. During the year ended June 30, 2022, the Company purchased the remaining shares of in GEC GP. As of June 30, 2022, no non-controlling interest remains outstanding. Forest – Non-controlling interest classified as permanent equity In connection with the JPM Transactions on December 29, 2020, the Company sold JPM a 20.0 % common stock interest in Forest in exchange for $ 2.7 million. JPM has a representative on the Forest board of directors and the right to designate a number of directors commensurate with their common stock ownership interest. Forest has the right of first offer if the holder desires to sell the security and in the event of a sale of Forest, the holder must sell their securities (drag along rights) and has the right to participate in sales of Forest securities (tag along rights). The holder of the non-controlling interest is entitled to participate in earnings of Forest and is not required to fund losses. The holder of this non-controlling interest, JPM, is also the holder of Forest Preferred Stock discussed below. See Note 7 – Related Party Transactions. Consolidated Funds – Non-controlling interest classified as permanent equity As of June 30, 2022 and 2021 , GEG held 73.4 % and 71.3 %, respectively, of the capital in GESOF. The remaining capital in GESOF is recorded as a non-controlling interest. These non-controlling interests of GESOF include affiliated individuals and entities. FM Holdings – Non-controlling interest classified as permanent equity In connection with the acquisition of the real estate business in March 2018, the Company issued the former owner a 19.9 % interest in FM Holdings. The real estate business was sold in June 2021. See Note 5 – Discontinued Operations. F- 41 Redeemable Preferred Stock of Subsidiaries The following table summarizes the preferred stock activity: Balance, as of June 30, 2021 Issuance of Preferred Stock Redemption of Preferred Stock Balance, as of June 30, 2021 Issuance of Preferred Stock Redemption of Preferred Stock Balance, as of June 30, 2022 HC LLC Series A-1 Preferred Stock - 10,090 - 10,090 - ( 6,000 ) 4,090 Series A-2 Preferred Stock - 34,010 - 34,010 - - 34,010 Total HC LLC - 44,100 - 44,100 - ( 6,000 ) 38,100 Forest Forest Preferred Stock - 35,010 - 35,010 - - 35,010 Total - 79,110 - 79,110 - ( 6,000 ) 73,110 HC LLC - Series A-1 Preferred Stock classified as a liability In connection with the JPM Transactions, the Company issued 10,090 shares of Series A-1 Preferred Stock with a face value of $ 1,000 per share at issuance. The shares were issued pro-rata to the stockholders of DME Inc. in the form of a distribution and no consideration was provided in exchange for such instruments. The shares provide for a 9 % annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of $ 1,000 per share on the earlier of certain redemption events or December 29, 2027 . The redemption events include a bankruptcy, change in control or sale of the durable medical equipment business. The shares are redeemable at any time at the option of Company at a redemption price equal to face value. The shares rank senior and have preference to the common shares of HC LLC. The shares are non-voting, do not participate in the earnings of HC LLC and contain standard protective rights. During the year ended June 30, 2022, the Company optionally redeemed 6,000 shares of Series A-1 Preferred Stock on a pro-rata basis with holders. As the shares of Series A-1 Preferred Stock are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the shares are included in interest expense in the consolidated statement of operations. The fair value of each share of Series A-1 Preferred Stock on the issuance date was determined to be $ 801 per share. The difference between the fair value and the redemption value of $ 1,000 per share as well as debt issuance costs of $ 0.2 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the 7 -year period to redemption using the effective interest method. The holders of the Series A-1 Preferred Stock include our majority-owned consolidated subsidiary Forest ( 3,276 shares), as well as Corbel and VHG (each 407 shares), who are also the holders of non-controlling interests in DME Inc. discussed above. See Note 7 – Related Party Transactions. Such shares of Series A-1 Preferred Stock issued to consolidated subsidiaries and their effects on our operations have been eliminated in consolidation. HC LLC Series A-2 Preferred Stock classified as a liability In connection with the JPM Transactions, the Company issued 34,010 shares of Series A-2 Preferred Stock with a face value of $ 1,000 per share at issuance. The shares were issued to Forest in exchange for cash equal to the face value of such shares. The shares provide for a 9 % annual dividend, which is payable quarterly. The shares are mandatorily redeemable by the Company at their face value of $ 1,000 per share on December 29, 2027 , or at a 0 - 3 % premium decreasing over time based upon the occurrence of certain redemption events prior to December 29, 2027. The redemption events include a bankruptcy, change in control or sale of the durable medical equipment business. The shares are redeemable at any time at the option of Company at a redemption price at face value plus the 0 - 3 % premium then in place. The shares rank senior and have preference to the common shares of HC LCC. The shares are non-voting and contain standard protective rights. In addition, upon a sale of the durable medical equipment business, the holders of HC LLC Series A-2 Preferred Stock are entitled to the greater of their liquidation preference or 33 % of proceeds arising from such sale. F- 42 As the shares of Series A-2 Preferred Stock are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the shares are included in interest expense in the consolidated statement of operations. We have identified the feature allowing holders of the HC LLC Series A-2 Preferred Stock to participate in up to 33% of proceeds arising from a sale of the durable medical equipment business as an embedded derivative. We have bifurcated this embedded derivative from the mandatorily redeemable preferred stock host and have recorded the derivative liability at fair value. The fair value of the derivative liability on the issuance date was $ 6.5 million, and will be marked to fair value at each reporting date going forward. The fair value of each share of Series A-2 Preferred Stock on the issuance date was determined to be $ 810 per share. The difference between the fair value and the redemption value of $ 1,000 per share as well as debt issuance costs of $ 1.1 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the 7 -year period to redemption using the effective interest method. The holder of the Series A-2 Preferred Stock is our majority-owned consolidated subsidiary Forest. Such shares and related embedded derivatives issued to consolidated subsidiaries and their effects on our operations have been eliminated in consolidation. Forest Preferred Stock classified as a liability In connection with the JPM Transactions, Forest issued 35,010 shares of preferred stock in Forest with a face value of $ 1,000 per share at issuance. The preferred shares were sold to JPM in exchange for cash equal to the face value of such shares. The preferred shares provide for a 9 % annual dividend, which is payable quarterly. The preferred shares are mandatorily redeemable by the Company at their face value of $ 1,000 per share on December 29, 2027 , or at a 0 - 3 % premium decreasing over time based upon the occurrence of certain redemption events prior to December 29, 2027. The redemption events include the occurrence of an ownership change that triggers an IRC § 382 limitation which reduces Forest net operating loss carryforwards to less than $ 300 million. The preferred shares are redeemable at any time at the option of Company at a redemption price at face value plus the 0 - 3 % premium then in place. The preferred shares rank senior and have preference to the common shares of Forest. The shares are non-voting, do not participate in the earnings of Forest and contain standard protective rights. As the preferred shares are mandatorily redeemable at a specified date, the security has been classified as a liability in the consolidated balance sheet. The dividends on the preferred stock are included in interest expense in the consolidated statement of operations. The fair value of each share of Forest Preferred Stock on the issuance date was determined to equal its face value based on the transaction price. Debt issuance costs of $ 1.2 million is accounted for as a debt discount and accretion of the discount will be charged to interest expense over the 7 -year period to redemption using the effective interest method. The holder of the Forest Preferred Stock is JPM, who is also the holder of the non-controlling interests in Forest discussed above. See Note 7 – Related Party Transactions. 17. Stockholders' Equity Tax Benefits Preservation Agreement On January 28, 2018, the Board of Directors of the Company adopted a Tax Benefits Preservation Agreement, between the Company and Computershare Trust Company, N.A., as Rights Agent (the Rights Plan ) to replace the Company’s existing Tax Benefits Preservation Agreement, which expired on January 29, 2018, (the Expired Agreement ). The Rights Plan is substantially the same as the Expired Agreement. In October 2017, the original Rights Plan was approved by the Company’s stockholders. The Rights Plan is designed to reduce the possibility that certain changes in ownership could result in limitations on the use of the tax attributes, by restricting the ability of a person or entity from acquiring ownership (including through attribution under the tax law) of 4.99 % or more of the Company’s common stock and the ability of persons or entities now owning 5 % or more of the outstanding common shares from acquiring additional common shares. F- 43 Pursuant to the terms of the Rights Plan, the Company’s Board of Directors declared a dividend distribution of one Preferred Stock Purchase Right (a Tax Right ) for each outstanding share of common stock, par value $ 0.001 per share of the Company (the Common Stock ), to stockholders of record as of the close of business on January 29, 2018 (the Record Date ). In addition, one Tax Right will automatically attach to each share of Common Stock issued between the Record Date and the Distribution Date (as defined in the Rights Plan). Each Tax Right entitles the registered holder thereof to purchase from the Company a unit consisting of one ten -thousandth of a share (a Unit ) of Series A Junior Participating Cumulative Preferred Stock, par value $ 0.001 per share, of the Company at a cash exercise price of $ 15.00 per Unit (the Exercise Price ), subject to adjustment, under the conditions specified in the Rights Plan. The Tax Rights are not exercisable until the Distribution Date and will expire at the earlier of (a) January 29, 2028; (b) the time when the Tax Rights are redeemed as provided therein; (c) the time when the Rights are exchanged as provided therein; (d) the repeal of Section 382 of the Code if the Independent Directors (as defined in the Rights Plan) determine that the Rights Plan is no longer necessary for the preservation of Tax Benefits (as defined in the Rights Planet); (e) the beginning of the taxable year of the Company to which the Company’s Board of Directors determines that no Tax Benefits may be carried forward, unless previously redeemed or exchanged by the Company. Stock Plans In November 2013, the Company’s stockholders approved the Amended and Restated 1999 Directors’ Equity Compensation Plan (the Directors’ Plan ). Options and awards granted to new or existing Outside Directors (as defined in the Directors’ Plan) under the Directors’ Plan vest ratably over a period of one to three years . The Directors’ Plan also provides for the acceleration of options upon the dismissal of an Outside Director from the Board of Directors of the Company upon or within 24 months following a change in control of the Company. The exercise price of options granted under the Directors’ Plan is equal to the fair market value of the Company’s common stock on the date of grant. Under the Directors’ Plan, stock option grants have a term of ten years . As of June 30, 2022 , the Company had no shares outstanding under the Directors’ Plan. In June 2016, the Company’s stockholders approved the Great Elm Group, Inc. 2016 Long-Term Incentive Plan (the 2016 Long-Term Incentive Plan ) and the Great Elm Group, Inc. 2016 Employee Stock Purchase Plan (the 2016 Employee Stock Purchase Plan ). In October 2018, the Company’s stockholders approved amendments to the 2016 Long-Term Incentive Plan. In November 2021, the Company’s stockholders approved an increase to the number of shares available for issuance under the Long-Term Incentive Plan. As of June 30, 2022, the Company had a total of 3,446,728 shares outstanding under the 2016 Long-Term Incentive Plan and no shares were outstanding under the 2016 Employee Stock Purchase Plan. The following table summarizes the number of common shares available for future issuance under the plans discussed above as of June 30, 2022: Shares of Common Stock Available for Future Issuance Directors' Plan 26,166 2016 Long-Term Incentive Plan 1,268,819 2016 Employee Stock Purchase Plan 944,000 Total 2,238,985 F- 44 Non-Employee Director Deferred Compensation Plan In December 2020, the Company established the Great Elm Group, Inc. Non-Employee Directors Deferred Compensation Plan allowing non-employee directors to defer their cash and/or equity compensation under a non-revocable election for each calendar year. Such compensation is deferred until the earlier of 3 years from the original grant date of such compensation, termination of service or death, and is payable in common stock shares. As of June 30, 2022 , there were 110,008 restricted stock units and restricted stock awards that had vested but were deferred under the plan. Restricted Stock Awards and Restricted Stock Units In November 2021, the Compensation Committee of the Board of Directors (the Compensation Committee) in its discretion determined that an aggregate of 580,023 performance shares previously awarded to certain employees had vested. These restricted stock awards granted had both performance and service requirements in connection with the formation of the investment management business. The vesting of these awards was subject to a five-year service requirement and an investment management cumulative revenue collection target of $ 40 million for the five-year period ended November 3, 2021. The discretionary vesting of shares, as determined by the Compensation Committee resulted in a charge to stock-based compensation expense of $ 0.6 million during the year ended June 30, 2022. During the year ended June 30, 2022 , the Company granted 1,524,896 additional restricted stock awards that have only service requirements. Restricted stock units granted are subject to service requirements. The Company accounts for forfeitures of the restricted stock units in the period incurred. During the year ended June 30, 2022 the Company granted 148,139 shares of restricted stock units to employees and directors. The aggregate grant date fair value of restricted stock granted during the years ended June 30, 2022 and 2021 was $ 3.1 million and $ 0.9 million, respectively. For the years ended June 30, 2022 and 2021, the total intrinsic value of restricted stock vested was $ 2.2 million and $ 1.1 million, respectively. The activity of the Company’s restricted stock awards and units for the year ended June 30, 2022 was as follows: Restricted Stock Awards and Restricted Stock Units Restricted Stock (in thousands) Weighted Average Grant Date Fair Value Outstanding at June 30, 2021 904 $ 3.76 Granted 1,673 1.83 Vested ( 1,112 ) 3.16 Forfeited ( 153 ) 3.87 Outstanding at June 30, 2022 1,312 $ 1.79 Stock Options The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option pricing model and assumptions noted in the following table. The Company estimates the expected term for new grants based upon actual historical experience. The Company’s expected volatility for the expected term of the option is based upon the historical volatility experienced in the Company’s stock price. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company determines the fair value of non-vested shares based on the Nasdaq closing stock price on the date of grant. The ranges of assumptions used to value options granted were as follows: For the years ended June 30, 2022 2021 Expected volatility 69.8 % - 69.8 % 63.8 % - 66.5 % Expected dividends - - Expected term (years) 3.25 - 3.25 3.25 - 3.25 Risk-free rate 60.30 % - 60.30 % 0.23 % - 0.40 % F- 45 The option activity for the year ended June 30, 2022 was as follows: Options Shares (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) Outstanding at June 30, 2021 2,493 $ 3.69 4.51 $ - Options granted 18 2.87 Exercised - - Forfeited, cancelled or expired ( 377 ) 3.67 Outstanding at June 30, 2022 2,134 $ 3.68 3.34 $ - Exercisable at June 30, 2022 1,972 $ 3.65 3.23 $ - Vested and expected to vest as of June 30, 2022 2,134 $ 3.68 3.34 $ - The weighted average grant date fair value of options, per share, granted during the years ended June 30, 2022 and 2021 was $ 1.02 and $ 1.14 , respectively. No options were exercised during the year ended June 30, 2022 or 2021. Stock-based compensation expense totaled $ 2.8 million and $ 1.8 million for the years ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and 2021, the Company had unrecognized compensation cost related to all unvested share awards and options totaling $ 2.3 million and $ 1.4 million, respectively, expected to be recognized as the awards and options vest over the next 1.2 years. During the year ended June 30, 2022, the Company issued compensation to certain employees in the form of GECC common shares to be settled with GECC shares currently held by the Company. The total grant date value of GECC shares awarded for the year ended June 30, 2022 was $ 0.9 million, of which $ 0.2 million vested immediately, and the balance will vest annually pro-rata over a three year period. Related compensation expense was $ 0.4 million for the year ended June 30, 2022 . 18. Income Taxes The Company had loss from continuing operations before provision for income taxes of $ 15.0 million and $ 6.8 million for the years ended June 30, 2022 and 2021, respectively. There was no foreign activity during these years. The provision for income taxes includes the following: For the years ended June 30, (in thousands) 2022 2021 Current $ 106 $ 1,608 Deferred $ ( 85 ) $ 67 Total $ 21 $ 1,675 The Company recognized an income tax expense from continuing operations of $ 0.02 million and $ 1.7 million for the years ended June 30, 2022 and 2021 , respectively. This expense consists solely of state and local income taxes. No federal income taxes were incurred for the years ended June 30, 2022 and 2021. There were no intraperiod allocations during the year ended June 30, 2022. The Company recognized an income tax benefit with respect to discontinued operations of $ 0.1 million during the year ended June 30, 2021 related to intraperiod allocations. F- 46 The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's loss before income taxes by the statutory tax rate of 21 % to the total tax expense. For the years ended June 30, (in thousands) 2022 2021 Federal tax benefit at statutory rate $ ( 3,153 ) $ ( 1,437 ) State taxes net of federal impact ( 504 ) ( 289 ) Permanent adjustments 750 32 Change in valuation allowance ( 27,527 ) ( 95,294 ) Provision to return true-up 159 ( 61 ) Deferred remeasurement 287 ( 249 ) Net operating loss and credit expirations 30,059 99,071 Stock compensation adjustment ( 42 ) ( 53 ) Other ( 8 ) ( 45 ) Total tax expense $ 21 $ 1,675 The tax effect of temporary differences that give rise to significant portions of the Company's deferred tax assets and liabilities are as follows: As of June 30, (in thousands) 2022 2021 Deferred Tax Assets: Net operating loss carryforwards $ 190,535 $ 217,216 Accruals and allowances not deductible for tax purposes 1,646 1,411 Acquired intangibles 13 - Stock based compensation 603 621 Unrealized loss on investment 5,361 5,326 Lease liability 1,005 1,436 Investment in partnerships 10,464 11,482 Interest expense carryforward 560 - Total deferred tax assets, gross $ 210,188 $ 237,492 Less: valuation allowance $ ( 207,085 ) $ ( 234,612 ) Total deferred tax assets, net $ 3,103 $ 2,880 Deferred Tax Liabilities: Right to use asset $ ( 951 ) $ ( 1,348 ) Acquired intangibles - ( 207 ) Convertible debt discount ( 213 ) - Goodwill ( 2,225 ) ( 1,696 ) Total deferred tax liabilities $ ( 3,389 ) $ ( 3,251 ) Total deferred tax liabilities, net (indefinite-lived assets) $ ( 286 ) $ ( 371 ) In light of the Company's history of cumulative operating losses, the Company recorded a valuation allowance for all of its federal and state deferred tax assets, as it is presently unable to conclude that it is more likely than not that the federal and state deferred tax assets in excess of deferred tax liabilities will be realized. The decrease of $ 27.6 million in the overall valuation allowance relates primarily to the expiration of federal tax attributes. The state deferred amounts reflected in the above table were calculated using the enacted tax rates. The Company will establish the related federal deferred tax liability for the benefit of the state deduction in conjunction with its analysis of the realizability of its state deferred tax assets. The Company has a net deferred tax liability due to indefinite-lived goodwill that is not amortizable for US GAAP purposes and forecasted future state income due to the reversal of taxable temporary differences in states where the Company has no net operating losses. F- 47 As of June 30, 2022, the Company has net operating loss ( NOL ) carryforwards for federal and state income tax purposes of approximately $ 821 million and $ 211 million, respectively. The federal NOL carryforwards generated prior to fiscal year 2018 will expire from 2023 through 2037 . The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely. The California NOL carryforwards of will expire from 2029 through 2037 . The Massachusetts NOL carryforwards will expire from 2031 to 2038 . The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, 2023 (in thousands): Fiscal Year of Expiration Federal NOL carryforwards 2023 131,077 2024 60,132 2025 117,277 2026 through 2037 486,542 Indefinite 26,039 Total $ 821,067 Under Internal Revenue Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Internal Revenue Code) of greater than 50 % within a rolling three-year period. If it is determined that prior equity transactions limit the Company's NOL carryforwards, the annual limitation will be determined by multiplying the market value of the Company on the date of the ownership change by the federal long-term tax-exempt rate. Any amount exceeding the annual limitation may be carried forward to future years for the balance of the NOL carryforward period. During the years ended June 30, 2022 and 2021, the total amount of gross unrecognized tax benefit activity was as follows (in thousands): Balance as of June 30, 2020 $ 44,380 Reductions for tax positions of prior years ( 93 ) Lapse of statute of limitations ( 8,268 ) Balance as of June 30, 2021 36,019 Addition for tax positions of prior years 509 Reductions for tax positions of prior years ( 71 ) Lapse of statute of limitations ( 4,127 ) Balance as of June 30, 2022 $ 32,330 During the year ended June 30, 2021, the Company’s unrecognized tax benefits decreased by $ 3.7 million primarily due to the expiration of the Company’s historical research and development credits for which an unrecognized tax benefit had been established. As of June 30, 2022 and 2021 , the Company had approximately $ 32.3 million and $ 36.0 million, respectively, of unrecognized tax benefits. The unrecognized tax benefits, if recognized, would impact the effective tax rate by a corresponding amount without considering the impact of the valuation allowance. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in tax expense on the Company’s consolidated statements of operations. As of June 30, 2022 and 2021 , no amount is accrued for interest associated with tax liabilities. Although timing of the resolution and/or closure on the Company's unrecognized tax benefits is highly uncertain, the Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months. F- 48 The Company files U.S. federal and U.S. state tax returns. Because of NOL carryforwards, substantially all of the Company's tax years, from the 1995 through 2022 fiscal years, remain open to IRS examinations with the exception of the 2010 and 2009 fiscal years for which IRS examinations have been completed. Substantially all of the Company’s tax years, from the 1995 through 2022 fiscal years, remain open to state tax examination. 19. Segment Information The Company allocates resources based on two business operating segments: durable medical equipment and investment management with general corporate representing unallocated costs and activity to arrive at consolidated operations. Activity not allocated to the segments include, but are not limited to, certain investment and financing activities, professional fees, costs associated with being a public company, acquisition costs and costs associated with executive and corporate management departments, including compensation, benefits, rent and insurance. All operations and assets are based in the United States. In June 2021, the Company sold our real estate business. Due to its classification as a discontinued operation, our historical segment information has been recast to remove real estate as a reportable segment. The following tables summarize the results of operations by segment. For the year ended June 30, 2022 (in thousands) Durable Medical Equipment Investment Management (1) General Corporate (1) Intercompany Eliminations (2) Consolidated Total Revenue: Total revenue $ 63,458 $ 4,516 $ 876 $ ( 876 ) $ 67,974 Operating costs and expenses: Cost of durable medical equipment sold and services ( 16,795 ) - - - ( 16,795 ) Cost of durable medical equipment rentals ( 7,149 ) - - - ( 7,149 ) Depreciation and amortization ( 1,737 ) ( 523 ) ( 1 ) - ( 2,261 ) Non-cash compensation (3) - ( 1,872 ) ( 1,339 ) - ( 3,211 ) Transaction costs (4) ( 582 ) - ( 499 ) - ( 1,081 ) Other selling, general and administrative ( 32,987 ) ( 4,879 ) ( 4,594 ) 876 ( 41,584 ) Total operating expenses ( 59,250 ) ( 7,274 ) ( 6,433 ) 876 ( 72,081 ) Other income (expense): Interest expense ( 4,987 ) ( 161 ) ( 5,384 ) 4,746 ( 5,786 ) Other income (expense) ( 3,066 ) ( 5,633 ) 8,322 ( 4,746 ) ( 5,123 ) Total other income (expense), net ( 8,053 ) ( 5,794 ) 2,938 - ( 10,909 ) Total pre-tax income (loss) from continuing operations $ ( 3,845 ) $ ( 8,552 ) $ ( 2,619 ) $ - $ ( 15,016 ) For the year ended June 30, 2021 (in thousands) Durable Medical Equipment Investment Management (1) General Corporate (1) Intercompany Eliminations (2) Consolidated Total Revenue: Total revenue $ 57,643 $ 3,210 $ 579 $ ( 579 ) $ 60,853 Operating costs and expenses: Cost of durable medical equipment sold and services ( 16,881 ) - - - ( 16,881 ) Cost of durable medical equipment rentals ( 6,950 ) - - - ( 6,950 ) Depreciation and amortization ( 1,909 ) ( 473 ) ( 1 ) - ( 2,383 ) Non-cash compensation (3) - ( 757 ) ( 998 ) - ( 1,755 ) Transaction costs (4) ( 299 ) - ( 618 ) - ( 917 ) Other selling, general and administrative ( 28,969 ) ( 2,810 ) ( 4,504 ) 579 ( 35,704 ) Total operating expenses ( 55,008 ) ( 4,040 ) ( 6,121 ) 579 ( 64,590 ) Other income (expense): Interest expense ( 3,950 ) ( 101 ) ( 3,252 ) 2,354 ( 4,949 ) Other income (expense) ( 1,174 ) 3,654 1,716 ( 2,354 ) 1,842 Total other income (expense), net ( 5,124 ) 3,553 ( 1,536 ) - ( 3,107 ) Total pre-tax income (loss) from continuing operations $ ( 2,489 ) $ 2,723 $ ( 7,078 ) $ - $ ( 6,844 ) F- 49 (1) Previously reported non-operating activity including dividend income and unrealized gains/losses related to managed investments has been reclassified from General Corporate to Investment Management to conform with current segment organization. (2) The Company’s wholly-owned subsidiary, DME Manager, provides advisory services to HC LLC (formerly to DME, Inc) and receives consulting fees for those services. DME Manager is considered part of the general corporate operations while HC LLC is part of the durable medical equipment segment. The corresponding expense to HC LLC and revenue to DME Manager are eliminated in consolidation. Beginning December 29, 2020, DME Manager also provides advisory services to Forest and receives a consulting fee from Forest for those services. Both DME Manager and Forest are part of general corporate operations, and the corresponding revenue and expense are eliminated in consolidation. Additionally, Forest owns Series A-1 Preferred Stock and Series A-2 Preferred Stock of HC LLC. Forest is part of general corporate operations while HC LLC is part of the durable medical equipment segment. The corresponding interest expense to HC LLC and interest income to Forest are eliminated in consolidation. (3) Non-cash compensation includes stock-based compensation and compensation in the form of stock in portfolio companies held by the Company. Non-cash compensation attributable to the investment management segment is included in investment management expenses in the consolidated statements of operations. Non-cash compensation attributable to the general corporate segment is included in selling, general and administrative expense in the consolidated statements of operations. (4) Transaction costs, which consist of legal and other professional services, are included in selling, general and administrative expense in the consolidated statements of operations. The following tables summarize assets by segments: As of June 30, 2022 (in thousands) Durable Medical Equipment Investment Management (1) General Corporate (1) Total Fixed assets, net $ 8,025 $ 17 $ - $ 8,042 Identifiable intangible assets, net 5,921 13,250 - 19,171 Goodwill 52,463 - - 52,463 Other assets 11,616 54,520 22,275 88,411 Total $ 78,025 $ 67,787 $ 22,275 $ 168,087 As of June 30, 2021 (in thousands) Durable Medical Equipment Investment Management (1) General Corporate (1) Total Fixed assets, net $ 8,349 $ 21 $ 2 $ 8,372 Identifiable intangible assets, net 7,104 1,824 - 8,928 Goodwill 50,536 - - 50,536 Other assets 21,150 66,907 5,976 94,033 Total $ 87,139 $ 68,752 $ 5,978 $ 161,869 (1) Managed investment balances have been reclassified from General Corporate to Investment Management to conform with current segment organization. 20. Commitments and Contingencies From time to time, the Company is involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. The Company maintains insurance to mitigate losses related to certain risks. The Company is not a named party in any other pending or threatened litigation that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows. F- 50